Property Damage Liability: The Cost of Civil Unrest

The widespread civil unrest and rioting the nation experienced in 2020 has spotlighted property damage liability and the language we use to talk about providing coverage for the types of events that took place. It’s still unclear what the final tally of losses will be, but many reports are estimating over $2 Billion, which would be a new record. 

Evaluation for insurance companies is a challenge due to the uniqueness of all the different claims coming in from businesses. Each claim must be evaluated on its unique set of facts and policy terms. Also, insurers must factor in the coronavirus variable and the documentation of lost income from closures. Insurers need to get innovative to figure out how to compensate policyholders best.

Educating policyholders on the various types of coverages they need to protect their business in a volatile environment is more critical than ever. 

The cost of riots

A recent Insurance Business America article reported that in 2020 around 140 cities endured hundreds of millions of dollars in property loss damages from rioting and looting. Property Claim Services (PCS), a company that has been tracking insurance claims related to civil disorder since 1950, reported that the civil unrest between May 26 –June 8 had set a new record. As noted above, the Insurance Information Institute is predicting that the final number could be over $2 billion. 

What’s even more astounding is that the $2 billion does not represent the true losses. A recent FEE article points out that 75 percent of US businesses are underinsured, and around 40 percent of small businesses have no insurance at all. The millions in losses suffered by these businesses don’t even show up in the $2 billion figure.

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Protecting property during civil unrest

Preparation is still the best way to protect. Although 2021 is looking better than 2020, nobody predicted the civil unrest we saw last year, and nobody can predict the next time something similar or worse will occur. Business owners need to be aware of the damages that can arise from civil unrest and how they can best prepare their business if an event impacts them.

The first step to mitigating the risk of property damage due to civil unrest is creating friction.

  • Add security fencing and window protection.
  • Board up windows when historical civil unrest triggering events takes place.
  • Add security cameras.
  • Install security lighting.
  • Implement an alarm system.
  • Ensure all windows and entrances are secured with proper locking systems.
  • Hire security guards.
  • Assess and remove valuables.
  • Communicate with local authorities and leaders.

Secure civil unrest insurance

Even with the best plan in place, damage can and often still occurs. Business owners need the proper insurance to cover civil unrest losses. So, who pays for the losses?

The first in line to pay for injuries and damages following a civil unrest event is insurance companies. However, insurance doesn’t always cover everything without the right policy. Businesses that don’t have protection against theft or looting can be left covering the losses out of pocket.

As we noted earlier, around 75 percent of small businesses are underinsured. When losses occur and a business is underinsured, it’s often impossible to keep the doors open. Business owners must understand their property damage liability — the risks, types of coverage, and exactly what their policy covers. 

McGowan Program Administrators Active Shooter / Workplace Violence Insurance considers all classes of business, including government agencies, education, religious institutions, hospitality, entertainment, retail, public entities, and more. Contact us today.

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