Industry Representatives Examine Potential Claims Issues Following Riots

By | May 6, 2015

Some 140 vehicle fires, more than a dozen structural fires and nearly 200 arrests were reported in wake of the Baltimore riots that shook the city last week. And more than 200 businesses were damaged during the riots, according to Maryland Gov. Larry Hogan.

Last week’s riots — which erupted after the funeral of Freddie Gray, who died of a deadly spinal cord injury sustained during police custody — prompted Gov. Hogan to declare a state of emergency on April 27, and from April 28 until May 3, a Baltimore citywide curfew ordered residents to stay home between 10 p.m. and 5 a.m.

Representatives of the insurance industry say that for most of the damage that’s been done, as long as the individuals and the businesses are insured, they would have coverages. Auto, homeowners, and business insurance policies generally include coverage for property losses caused by riots and civil commotions, such as those that occurred in Baltimore, according to the Insurance Information Institute (I.I.I.).

Shelley Arnold, president of the Independent Insurance Agents of Maryland, also noted: “Riot and civil commotion is a named peril on almost every property policy. When we talk about riots and civil commotion, a lot of policies actually define them to include looting.”

But she said there are some coverage issues that come into question because some consumers may not have full coverage.

For example, in Maryland, vehicles must be covered by liability insurance but not for comprehensive and collision coverage, “and that’s where people would pick up the coverage for the cars burning,” she said. “If they don’t think they need comp and collision coverage on their auto, they are probably not going to buy it. So it will become an issue of, do they have that coverage? If they have comp and collision coverage, riot and civil commotion is a named peril on the auto policy.”

“The biggest problem with the uninsured losses is going to be those vehicles that didn’t have comp and collision coverage. They didn’t have comprehensive coverage because it’s optional,” Arnold said. “And I also think the Maryland Insurance Administration and the governor’s office will be working very closely with them to make certain that what we think can be done will be done.”

The other potential coverage question involves business income. “Are these businesses covered for business income if there is a direct loss? If a restaurant has a direct loss, and if they have business income coverage, they are going to have coverage for the loss of income during the shutdown,” she said.

Civil Authority

A gray area, however, is going to be civil authority additional coverage, Arnold said. “Is the curfew considered an act of civil authority? For people who do not have direct damage, are they going to be provided or given coverage for their business income? I think that’s going to be the gray area and that’s going to be where we are going to see some time to settle this type of claims.”

According to the standard Insurance Services Office’s Commercial Property Business Income Form-CP 0030, civil authority coverage for business income begins 72 hours after the time of the first action of civil authority that prohibits access to the described premises and applies for a period of up to four weeks from the date when the coverage began.

As far as the personal property, it’s almost a certainty that those types of losses will be covered, she added. “And don’t forget that if they have a homeowners’ policy, there is additional living expense coverage.”

Homeowners policies pay to repair, or rebuild, an insured home if its structure is damaged or destroyed as the result of a riot or civil commotion, as well as to replace the homeowner’s personal belongings if they are damaged or stolen during the event, according to the I.I.I. And if the home is rendered uninhabitable by the damage caused by a riot or civil commotion, policyholders can file an additional living expenses claim to finance their temporary housing expenses until their residence has been repaired.

Fire damage is probably going to have the biggest loss numbers, Arnold noted. “So you had the CVS store fire and you had a huge senior center that was going to have 60 units, a recreation center for the youth, and that was burned to the ground. There were several home fires and there were vehicle fires, so I think the fire damage is going to be at the top of the list money-wise,” she said.

“The looting and the theft, and then the business income because of the curfew, the businesses have been losing money hand over fist in Baltimore. Even down by Camden Yards, the restaurants and the harbor, the new casino,” she added. “So there is a lot of business income that may not even be in that general area of the riot, but that’s going to be impacted by the curfew.”

Maryland Insurance Administration

The Maryland Insurance Administration also issued a statement encouraging property owners and business owners whose property was damaged in the recent violence to contact their insurance agents or carriers to see if they are covered. MIA noted that many policies, both for commercial and personal property, have provisions for civil unrest. In addition, comprehensive auto policies may cover damage from the violence, MIA said.

Additionally, Maryland Insurance Commissioner Al Redmer, Jr. issued a statement to insurance companies last week, asking them for their assistance and flexibility in the adjudication of personal and business claims stemming from the riots. Redmer asked insurers to allow the use of information other than police reports in the claims adjudication since police resources have been stretched and the writing of police reports is not a high priority.

Redmer also temporarily lifted insurance restrictions on when prescription medications can be refilled at pharmacies within city limits. Several pharmacies have been looted or burned, leaving parts of the city without access to their prescriptions, according to MIA. The emergency regulation only applies to health insurance plans regulated by MIA.

Redmer said the insured losses from the riots are likely exceed $1 million, the Associated Press reported. The commissioner added that about a half-dozen of the hundreds of insurers regulated by the commission have declared temporary moratoriums on accepting new business in affected areas.

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