2020 HAS LEFT ITS MARK ON THE UNITED STATES. JUST LIKE JACK AND JILL, THE WORLD HAS BEEN CLIMBING AN UPHILL BATTLE
TRYING NOT TO FALL. UNLIKE JACK, THE INSURANCE INDUSTRY HAS STOOD STRONG.
The country has trudged and persevered through mass unemployment, a rise in natural catastrophes, and the worst pandemic in the last 100 years. Not since the 1960s has the country experienced this level of civil unrest leaving business owners on the verge of destitution and associations in constant fear of rising claims. In the spring of 1968, the Martin Luther King assassination riots in New York caused $4 million in losses equating to $30 million today. Through it all, the insurance industry continues to respond and adapt to the national environment. Civil unrest remains an issue on the forefront of insurance carriers, business owners, and community associations alike.
Civil unrest encompasses any disruption of normal social order. An example would be when a group of people are on a mission to get their voices heard about a subject they believe is unjust. Strikes and protests fall into this category. These events may be peaceful or violent. Riots resulting from these events are characterized as civil unrest. Definitions in insurance policies are crucial. The definition of civil unrest is significant because it defines the scope of what can and cannot be covered in the policy. Historically, insurance carriers characterized civil unrest as a type of civil war. After legal battles, the courts ruled that riots were covered, and insurrection or civil war was excluded. Another issue for the courts to consider was how terrorism events are covered. As terrorism became more prevalent, the courts responded and ruled, clarifying two more definitions. War must be sponsored by a sovereign nation and terrorism must be sponsored by an organization that is not a sovereign nation. The definition of civil unrest does not include terrorism. This coverage can be bought separately. If terrorism is excluded from your policy, the resulting fire could potentially be paid out. For example, if the terrorist event created a fire, those damages may be covered since fire is a named cause of loss.
There are 11 named causes of loss that are standard for most carriers and policies. Even the most basic of commercial policies will name “riot and civil commotion” as a covered cause of loss. A commercial policy will go into effect if the claim: a) has a limit for the coverage and b) stems from a covered cause of loss. For example, if a business or a community association in downtown Chicago is set on fire due to civil unrest and their policy specifically names “riot and civil commotion” as a covered cause of loss, the damage to the structure will be covered up to the policy’s building limit. It is important to note the condition section of a policy will state whether the insured is responsible for protecting the property from further damage. This is another reason why, after windows have been smashed, businesses will immediately board up their windows to attempt to prevent more damage. Community associations in the city have taken similar measures on the first floors of the association’s properties. Urban areas continue to remain a hot zone for these events resulting in a higher loss ratio for urban community associations. Structural damage is not the only way a policy will respond. If rioters were to storm into an association’s clubhouse and destroy any of the property inside, the business personal property limits
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