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How Does Vandalism Impact my California Business Interruption and Business Insurance Claim?

beth-macdonald

As Americans, the ability to engage in peaceful civil disobedience is one of our most cherished and most important rights. But sometimes, activity that begins as peaceful protest morphs into something else. When things get out of hand, businesses are often looted or vandalized.

Not all business vandalism stems from violent protests, however. Celebrations can also lead to mayhem and destruction. In October 2020, for example, rowdy fans reportedly vandalized more than 30 buildings in downtown Los Angeles after the Lakers won their 17th NBA championship. Police made more than 70 arrests that night.

Document the extent of the vandalism

It may seem obvious, but there are certain things you can do to facilitate the claims process if your business is vandalized. First, call the police as soon as possible. They will take an official report, which can be used to substantiate your claim. Second, use your cell phone or another camera to take pictures or video of the damage. You can also use your phone to take notes or dictation about the carnage. Make a detailed list of any goods or cash that was stolen, too. Secure the premises as best you can, and call your insurance company.

What happens next depends on the type of business insurance

In general, businesses carry at least one type of insurance. Business interruption insurance and commercial property insurance are two of the most common. Both provide coverage if your business is vandalized, but do so in different ways.

Business interruption insurance:

Depending on the extent of the damage, you may be forced to cease operations for days, weeks or even months. In this case, business interruption insurance will cover associated financial losses. You may receive reparations for:

  • Lost profits – If the vandalism prevents your business from providing products or services, your policy may provide compensation for lost revenue.
  • Rent or lease payments – Most businesses do not own the buildings in which they are situated. Landlords may continue to require monthly rent payments even while your business is not generating any revenue. If so a business interruption policy may help cover these costs.
  • Relocation costs – In a worst-case scenario, vandals may cause irreparable damage. In this case, your business may be forced to move elsewhere. If so, your business interruption insurance may help cover moving expenses.
  • Employee wages – Clearly if your business is not generating revenue during a temporary closure for repairs, your ability to pay your employees is seriously compromised. In this case, business interruption insurance will cover payroll costs.
  • Taxes – Sure, you may have a contingency fund or similar resources to help your business get through tough times. But these reserves may not be enough to cover your tax obligations while your business operations are on hold. If you have business interruption insurance, it may help cover these costs.
  • Loan payments – Most lenders aren’t exactly known for their compassion. So if you’ve got a small business loan or similar obligations you will probably need help meeting them until your business reopens. A business interruption insurance policy may also help cover these payments.

However, there are certain things business interruption insurance does not cover if your business is vandalized. Specifically, it does not cover property damage and it does not cover short-term business interruption. In most cases, your business must be closed for at least three days for this coverage to kick in.

Commercial property insurance

A commercial property insurance policy and/or business owner’s insurance policy usually cover damage stemming from vandalism. However, these policies only do so as long as the building and contents are specifically designated for coverage.

These policies typically cover damage including but not limited broken windows and doors, damaged or stolen goods and materials, damaged business vehicles, and stolen money.

In this context, it is important to note that there is technically no such thing as a “riot clause” in commercial property insurance or business owner’s insurance policy. Instead, insurance providers use the term “riot and civil commotion” and list it as a “peril” in business insurance policies.

You should also be aware that your claim could be denied if the damage incurred stems from police or government action. For example, if police used “less than lethal” weapons to try to get a crowd to disperse and a beanbag round shattered your window, your business insurance would not cover that damage.

Your claim could also be denied if the insurance provider could prove that you knew that vandalism was likely to occur and did not take adequate precautions. For instance, your insurance company could deny your claim if it could prove you knew groups were planning on protesting recent police shootings and did not cover your windows and doors.

Effect of vandalism on COVID-19 business interruption claims

Finally, there’s another important issue we haven’t addressed. What if your business was already shut down due to COVID-19 restrictions and you want to file a business interruption claim based on the vandalism as well?

Unfortunately there is no simple answer. It all depends on what is covered and how the policy is written. So let’s begin by assuming your policy covers vandalism, but includes the following (or similar) language pertaining to COVID-19:

“Such loss or damage is excluded regardless of any other cause of event that contributes concurrently or in any sequence to the loss.” (Emphasis added.)

In this case, the language above would preclude coverage for your entire loss, even if some of it stemmed from vandalism.

Other factors, such as the method for calculation of lost business income and timing of civil intervention resulting in business closures also come into play.

As experienced Los Angeles business lawyers, we can easily help you determine if your claim was wrongfully denied. If so, we can also share legal options based on your unique situation. Start by contacting LawPLA to schedule an appointment with us. We’ll take from there.

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PLEASE NOTE: This is not a representation, warranty, or guarantee of a future result or outcome. Every case is different just like every one of our clients.

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