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Picking Up the Pieces: Does Insurance Cover Civil Unrest?

In times of uncertainty, insurance pros can help you assess the risks to your property and business continuity

By Megan Ryan | July 23, 2020

The staggering events of 2020 – a global pandemic, economic downturn and social unrest – have prompted business owners to assess their risks and ask questions about their insurance coverage.

What if I have to keep my doors closed for months? What if I have to shift my entire operational strategy to get through this downturn? What if my property is damaged during a protest that turns violent?

When protests broke out across the US and around the world earlier this summer, the risk management team at BOK Financial Insurance analyzed the impact of business insurance during these unprecedented times.

What if my physical business is damaged or forced to close because of protests and demonstrations?

First, determine if the physical damage to your property makes your facility unsafe for employees and customers. Answer these common questions:

Are your employees and customers safe in the facility? Do you need help boarding up broken windows? Are you able to operate the business in its current condition? If not, how long do you anticipate the business will need to be shut down? Can delivery drivers get to you?

Damage to windows, doors, light fixtures and other building structures should be covered under the building property coverage included in your insurance policy, said Kathy DeGrandchamp, BOK Financial Insurance operations manager—corporate systems and practice standards.

One possible exception is glass. Glass that is part of the building structure, such as store windows and plate glass on office fronts, is typically covered and built into base insurance rates. Check your policy to see if glass is covered or if you need to request a glass endorsement., which specifically covers glass damage if you are a building tenant and are obligated by the terms of your lease to provide coverage. Pay attention to the nuances in your policy, DeGrandchamp advised.

“If you are boarding up your windows to block access to the business as a preventative measure ahead of an anticipated protest or potential civil unrest, those expenses would not be covered by your insurance policy,” she said.

But if you spend money to prevent further losses after damage has been done, such as boarding up windows, relocating building contents or hiring a security guard, those expenses may be reimbursable by insurance.

Assess your property to see how you might lower your risk.

Ask your insurance carriers to conduct a “loss control inspection” of your physical locations to identify ways to make your facilities safer and more secure.

“These inspections may result in some costs to the business to implement the recommended additions, but ultimately, those changes will typically lower the risk to your company,” said Sara Kelley, risk management consultant at BOK Financial Insurance. “The businesses will have added expenses, but then discounts may become available on coverage for things like additional lighting, security cameras and other improved safety measures.”

Insurers want to know what they’re covering; every situation is different and every policy is unique.

“Approach your insurance broker as a partner – not a foe – when planning for business continuity and after an event that triggers a claim, Kelley added.

Understand the full extent of your coverage and the impact on your business.

“From the beginning, we try to establish if insurance coverage will come into play beyond the direct damage to the building and/or its contents,” DeGrandchamp said. “If you need to close the business for a period of time, insurance may kick in to cover some of your expenses.”

To design the appropriate coverage for your business, your insurance partner will help you consider your tolerance for risk and the appropriate coverages to align with your business needs. In some cases, insurance coverage may not be the most important factor.

“Some circumstances may require you to tap into savings or working capital to maintain operations and cover expenses if the business is unable to operate,” Kelley said. “Each situation that triggers insurance coverage to respond has specific parameters that must be met.”

If your business has been closed because of damage incurred during a protest, most insurance requires a 72-hour waiting period before business income coverage (also known as business interruption coverage) comes into play. Be sure to check your policy language and limitations.

In addition, business income coverage typically includes civil authority insurance, which provides coverage for loss of income that occurs when access to your premises has been prohibited by civil authority, such as local police.

“Having access to your property or business blocked by law enforcement or another government entity will typically prompt coverage to respond, but there are various deductibles to consider including time—how long access has been blocked—or distance from the civil action,” Kelley said. “Coverage could also be triggered even if your property is not directly damaged.”

In some cases, civil authorities can block you from entering your business in situations unrelated to protests, such as fires or flood damage that create a potentially unsafe environment.

“This conversation takes another twist as you think about different types of businesses,” DeGrandchamp said. “Running an office where employees can do their job away from the physical office is very different from a manufacturing facility, which requires access to machinery, tools and physical equipment.”

Bottom line: Partner with knowledgeable risk management professionals to evaluate your tolerance for risk. They’ll help you consider topics like business continuity plans, alternate ways to access your facility, remote work possibilities and budgets.

“These situations are rare, but it’s important to think through scenarios you might encounter,” Kelley said. “We help clients make their way through the ‘what if’ circumstances and build contingencies into their business continuity plans.

“Those come into play for everything from civil unrest to forced business closures to a pandemic or natural forces of nature, all of which we have experienced in just the first half of 2020.”

Learn more about the types of insurance highlighted in this article here.