City curfews and business interruption insurance: coverage varies
Following the death of 25-year-old Freddie Gray while in police custody on April 19, 2015, Baltimore erupted in civil unrest. Though protests began as largely peaceful, tensions flared between protesters and police officers between April 25 and April 29, and violent stand-offs, looting, vandalism, fires, and arrests punctured the demonstrations.
The city initiated a night curfew on April 28 in an attempt to quell disorder, but the 10 p.m. to 5 a.m. curfew had another effect: it hurt small businesses in the area. Many in the business community (particularly bar and restaurant owners) have voiced that the curfew seriously hurts revenue, noting that their property insurance would cover vandalism damage but not loss of income.
Though the curfew was lifted on May 3, 2015, it prompts an important question as Baltimore citizens and businesses struggle to recover: is there insurance that covers lost business income caused by mandatory curfews?
Business interruption insurance and the importance of reading your policy
Most small business owners have property insurance, but many still haven't heard of business interruption insurance, an endorsement that can be added to a standalone property policy or bundled with a business owner's policy. Business interruption insurance has a simple job: it can provide coverage for lost income when a covered property event forces your business to a halt. Usually, that means:
- Income coverage when fire, vandalism, theft, or windstorms force you to close shop to handle repairs and replace inventory
- Income coverage when a supply interruption puts your business on hold
In other words, this policy can give your business the financial flexibility it needs to recover after an unexpected disaster, allowing you to pay employee salaries, loans, and taxes even without new revenue flowing in.
But the question remains: can business interruption help out when the government implements a citywide curfew? That answer is a little trickier and depends entirely on the language of your policy.
For instance, some business interruption policies offer civil authority coverage, which can provide funds when a government-issued order prohibits access to the insured's property. In order for coverage to take effect, the order usually must:
- Prohibit access to the insured premises
- Result from a covered loss or damage caused by a covered peril at a location other than the insured property
So if vandalism in your area triggered a citywide curfew that caused your business to close temporarily, business interruption insurance may cover lost income if it offers civil authority coverage.
How do I know if I'm covered?
Again, whether or not your business interruption insurance policy offers civil authority coverage depends on the particular language of the policy. Additionally, that coverage may only apply when the governmental order is in place. You can read more about that in this article by the Property Insurance Coverage Law Blog.
It's worth looking into this type of coverage because you never know when an emergency order will keep clients and patrons from visiting your business. And it's not just civil unrest you have to worry about – state-imposed evacuations following natural disasters can keep your business from generating revenue at times it needs money the most.
So we can't stress this enough: if you're making contingency plans for worst-case scenarios, talk to an insurance agent about business interruption insurance. Even if you have this policy, be sure to read the fine print or review it with your agent to determine when you do and don't have coverage.
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