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Recovering insurance proceeds for property damage and business interruption losses caused by vandalism and looting

Business owners have suffered a double whammy when it comes to business interruption. Firstly, there was the interruption caused by the coronavirus pandemic for which coverage is still an open question. Businesses were then dealt a second blow from recent coordinated incidents of vandalism and looting. For the latter, many businesses have experienced actual physical loss, including broken storefronts, damaged and stolen business property, and smoke and fire damage. There is some good news for business owners; losses resulting from rioting, civil commotion and vandalism are typically covered by commercial property insurance policies.  

On June 8, 2020, the Illinois Department of Insurance issued Company Bulletin 2020-15, titled "Coverage Related to Business and Property Damage Losses, Including but not Limited to Those Arising Out of Vandalism and Looting." This bulletin followed Governor Pritzker’s June 1, 2020, disaster proclamation for Champaign, Cook, DuPage, Kane, Kendall, Macon, Madison, Sangamon and Will counties, which was later extended to Lake, Peoria, Rock Island, Stephenson and Williamson counties, to assist with recovery efforts after vandalism and looting caused significant property damage. In light of this proclamation and in recognition of the wide-spread damage, the Illinois Department of Insurance asked insurers to take protective measures, including applying claims best practices consistent with catastrophic events, expediting the handling of claims, providing advance claim payments, calculating business interruption coverage outside of the impact of the COVID-19 pandemic, and otherwise fairly treating policyholders, regardless of their size, even where full policy premiums were impacted as a result of the pandemic. The department also requested that insurers issue a moratorium on the cancellation or non-renewal of insurance for 60 days from the date of the bulletin. 

This is welcome news for policyholders who should act quickly to secure coverage for losses. Using the following checklist is recommended to maximize recovery under an insurance policy.
Step 1: Review your commercial property insurance carefully.

Commercial property insurance policies typically fall into two categories: all-peril policies and specific-peril policies. All-peril or all-risk property policies cover risks of direct loss except for those causes specifically excluded. In other words, unless excluded, the policy covers losses from damage regardless of the cause. Other policies cover specifically named perils, such as flood, fire or other types of enumerated causes. Generally, however, both types of policies provide coverage for losses resulting from riot, civil commotion and vandalism. In addition, provisions related to personal property coverage determine recovery for damage to furniture, computers, machinery and other building contents. Review your policy carefully to determine the amount of coverage available for your specific damage. Landscaping or other outdoor signage or appurtenances not attached to the building may be excluded or sub-limited under the policy, so it is important to review the specific language of your policy. 

In addition to providing reimbursement for losses from direct physical damage, these policies also typically provide some business interruption coverage that arise from that damage. This may include losses incurred while the property is being repaired or replaced. Because some access to property may have been restricted by the authorities, look to business interruption provisions related to civil authority coverage for loss of income coverage. Certain limits to the amount of coverage available may apply, including waiting periods and deductibles. 

Step 2: Notify your insurer as soon as practicable, and carefully document all damage.

It is important to provide notice to your insurer regarding the nature of the loss or damage as soon as possible. In addition, it is important to document the type and extent of the property damage through photographs, video and inventories. Review your policy carefully regarding the notice provisions and requirements for proof of claim. If your policy requires proof of police reports, it is important to follow through with these requirements as soon as possible. 

Step 3: Carefully review other policies that may provide additional coverage for losses.

Some property owners also suffered damage to vehicles. Carefully review your automobile policy for coverage under the optional comprehensive coverage portion. Further, a business owner’s policy often combines coverages, including property, liability and business interruption coverages for small to midsized businesses, so be sure to meticulously review this policy. No two policies are alike, so careful review of the actual language of your policy is important. Study the policy wording and work with your broker or insurance coverage counsel to maximize recovery under the coverage that you have. 

Client alert authored by Kristen E. Hudson (312 855 4315), Principal and General Counsel.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.
Chuhak & Tecson's attorneys, paralegals and staff remain committed to staying at the forefront of changes in the law and contributing to the success of our clients and colleagues.

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