As insurers begin to pay claims related to the unrest in Baltimore, one exclusion may give business owners grief.
As the civil unrest, looting and arson that affected Baltimore last week begins to die down, insurance companies are starting to evaluate and pay claims. One exclusion common in business policies, however, could frustrate the efforts of local business owners.
Representatives of the insurance industry told the Baltimore Sun that the majority of claims will fall under property damage and lost income headings, which are addressed by auto, homeowners and business property policies as well as business interruption coverage.
Business owners with plate glass windows will also need to have a rider in place in order to receive payment for any broken windows.
And while most industry representatives believe the affected policies will respond, a Baltimore attorney believes some business owners may hit a snag.
Alex Brown, a partner at Shapiro Sher, told the Sun many insurance policies carry exclusions for damages caused by “rebellion or uprising.”
“I think it will be interesting to see, particularly given the political considerations, if insurance companies start denying claims based on those exclusions,” said Brown. “Whether the riot falls under the exclusion will depend on the language.”
If exclusions do come into play, Brown notes that businesses will are the most likely to be affected. Homeowners policies, on the other hand, typically don’t spell out such stipulations.
In the wake of the unrest, Maryland Insurance Commissioner Al Redmer Jr. has attempted to make the claims process as painless as possible, even urging insurers to drop police report requirements.
“I know that under normal circumstances, police reports may play a role in the adjudication of your claims,” Redmer told carriers. “However, these are not normal circumstances. We are in an environment where our police resources are stretched and the writing of reports is not a high priority.
“We have personal and business policyholders that have been significantly affected by these events. I am asking for your assistance and flexibility during this period.”
The total cost of the Baltimore riots is not yet known, nor whether it will rank among the most costly events of civil unrest in the US.
According to Property Claim Services, which keeps statistics on such events, the more costly disturbances have historically been covered by states’ insurers of last resorts.
The 10 most expensive civil disorders in the US, measured by insured loss in 2013 dollars, include:
- Rodney King riots – April 29 -May 4, 1992; Los Angeles; $1,287 million
- Watts riots – August 11-17, 1965; Los Angeles; $325 million
- 12th Street riot – July 23, 1967; Detroit; $293 million
- Arthur McDuffie riots – May 17-19, 1980; Miami; $184 million
- Martin Luther King, Jr. assassination riots– April 4-9, 1968; Washington, DC; $161 million
- New York City blackouts – July 13-14, 1977; New York City; $108 million
- John Weerd Smith riots – July 12, 1967; Newark; $105 million
- Baltimore Martin Luther King, Jr. assassination riots – April 6-9, 1968; Baltimore; $94 million
- Chicago Martin Luther King, Jr. assassination riots – April 4-11, 1968; Chicago; $87 million
- NYC Chicago Martin Luther King, Jr. assassination riots – April 4-11, 1968; New York City; $27 million
In Baltimore, insurance carriers have declined to disclose claims numbers, though State Farm told the Sun they have received a “low number.”
