Businesses in Ferguson, Mo. will likely be able to collect on insurance for damages caused by protesters, but what about lost business income due to actions by authorities?
Ferguson has already seen the imposition and lifting of a curfew by Governor Jay Nixon, and the situation remains tense as anger flares over the police shooting of 18-year-old Michael Brown. The resulting protests and police response have made national headlines, and have also caused major disruptions to businesses in the area.
Loretta Worters, Insurance Information Institute vice president, says civil authority provisions, typically included within business-interruption coverage, will generally protect against losses from civil authority actions for lost business income and extra expense. Actions that commonly give rise to these claims, says Worters, include “curfews and other restrictions on access to places of business by customers, employees and owners.”
She says, “The way the policy reads, insurers will pay for the actual loss of business income the insured sustains and necessary extra expense caused by action of civil authority that prohibits access to the described premises,” provided (and try to keep up with the wording):
- Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage and the described premises are within that area but are not more than one mile from the damaged property (Worters says this is a fairly new addition to the policy); and
- The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the covered cause of loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.
Worters says if authorities prohibit access to an area because of a direct physical losses caused by a covered peril, in this case rioting, coverage should apply. “Generally a local fire department will not trigger a business income or extra-expense loss, unless there is large-scale rioting or a natural disaster,” Worters says.
Civil authority coverage for business income generally begins 72 hours after the time of the first action of civil authority that prohibits access to the premises. Civil authority coverage for extra expense typically beings immediately after the time of the first civil authority action.