Did your business or home suffer damage as a result of the recent riots and lootings which have taken place over the past several weeks? If so, you may be asking, “Does insurance cover riot damage, or am I stuck paying for all of this on my own?” This series is for you.
Today, Wheeler, DiUlio, & Barnabei want to discuss the ways in which some carriers cover damage to your actual structure, also known as the “dwelling” or “building.”
Next week, we’ll touch on how carriers cover your personal property, an important distinction in many policies. We will then discuss what we expect to be some of the biggest hurdles we anticipate relating to loss of income and loss of business claims because of the complications with COVID-19 closures.
Your physical structure, whether it be a commercial property (“Building”) or residential property (“Dwelling”), is almost always covered under your insurance policy. For a residential property, if you have an HO-3 policy – commonly referred to as “all-risk” or “open perils” – then the policy will cover something along the lines of “direct physical loss to your property.” This is true for many Business Owner Policies (“BOP”) and Commercial Policies (“CP”). This means is that all direct physical losses are covered, unless otherwise excluded later in your policy. Therefore, if your dwelling suffered damage from rioting or looting, this is a covered loss if there is not an applicable exclusion.
There are two exclusions that carriers may attempt to use (incorrectly) to deny claims for riot damage. These appear in most open perils policies, but they don’t actually exclude riot damage.
Here is the first exclusion:
8. a) War, whether declared or undeclared;
b) warlike acts;
g) civil war;
h) usurped power;
i) destruction for a military purpose; or
j) action taken by civil, governmental or military authority to hinder or defend against an actual or impending enemy act. (Allstate standard HO-3)
A close review of the above reveals that the recent events don’t fall within this purview.
This list is exhaustive, meaning only the items on this list are excluded. It does not have any language suggesting this is just a sample of the types of things the insurance company excludes. Because “riot” is not on the list, it isn’t excluded by this provision. However, even if this were just a sample, it still wouldn’t be covered. One way we interpret this kind of language is by using the term “Ejusdem Generis.” This Latin phrase, meaning “of the same kind,” stands for the proposition that, when viewing a list such as the exclusion above, we must look for the commonality of all things listed. In this case, “a” through “j” all appear to relate to actions taken by governmental authority. At the very least, none of the above relate to “riots” or “looting” by the average citizen.
Another exclusion the insurance company may attempt to cite improperly reads like this:
10. Vandalism or malicious mischief if your dwelling is vacant or unoccupied for more than 30 consecutive days immediately prior to the vandalism or malicious mischief. A dwelling under construction is not considered vacant or unoccupied.
When examining this exclusion, we see that the pertinent issue here to trigger the exclusion is whether or not your dwelling was “vacant or unoccupied for more than 30 consecutive days.” Obviously, this could cause some insurance companies pause when it comes to commercial properties, because of all the closures due to the COVID-19 pandemic. Luckily, most commercial policies have a 60-day limit rather than a 30-day limit, so the window is wider to make sure the property isn’t unoccupied. In addition, even going to check on a property once will restart the timer.
While some of the damages caused by the riots will undoubtedly be paid, we expect a fight from some insurance companies on some of these exclusions. If you have been denied damages from the recent riots, or underpaid and can’t afford to make the repairs, give us a call.