Civil Unrest Insurance Coverage: Fundamental Issues

Praccal Guidance

Civil Unrest Insurance Coverage:

Fundamental Issues

A Practical Guidance

Practice Note by Christina Arnone, Stinson, LLP

Chrisna Arnone

Snson, LLP

This practice note discusses the types of insurance

coverage that may be available under property policies

when an insured suffers physical loss or damage to insured

property as a result of civil unrest. This practice note

considers standard policy terms, limitations, and exclusions

implicated by rioting, civil commotion, vandalism, and/

or looting in connection with incidents of civil unrest.

Further, this practice note explores how the cause of loss

may impact the applicable policy deductibles and other

issues that may arise between policyholders and insurers

concerning the interpretation of key policy terms.

For more details about civil unrest and insurance coverage,

see New Appleman Sports & Entertainment Insurance Law

§ 2.03 (Examining Losses Related to Riots, Civil Unrest,

and Terrorism). New Appleman on Insurance Law Library

Edition § 8.12 (The Impact of Social Issues on Insurance

Regulation). New Appleman Sports & Entertainment

Insurance Law § 17.27 (Understanding Political Risk

Insurance). and New Appleman on Insurance Law Library

Edition § 45.12 (Terrorism).

For additional information about insurance coverage, see

Commercial Property Insurance, Commercial Property and

Liability Insurance, First-Party Property Insurance Policies,

Making a Commercial Property Claim after Loss or Damage,

Property Insurance Claim Filing Checklist, Insurance Claims

Resource Kit, and Insurance Coverage Resource Kit.

Causes of Loss to Insured

Property during Incidents of

Civil Unrest

Extensive property damage often accompanies prolonged

rioting and civil unrest. According to press reports,

Minneapolis and Saint Paul experienced approximately $550

million in damage to approximately 1,500 properties within

a period of five days after the May 25, 2020, death of

George Floyd Jr. The 1992 Los Angeles riots are reported

to have resulted in approximately $1 billion in damage

to more than 1,000 properties during a five-day period.

Insurance is critical to recovery efforts in the wake of such

widespread damage.

Commercial property policies ordinarily provide coverage for

property damage caused by civil unrest, including damage

from rioting, vandalism, and looting. There are three types

of “cause of loss” forms issued by the Insurance Services

Office (ISO) for property insurance policies: basic form (CP

10 10), broad form (CP 20 10), and special form (CP 30

10). These cause of loss forms specify the types of perils,

or causes of loss, for which insurance coverage is provided.

Special form (or “all risks”) policies provide coverage for all

risks of direct physical loss that are not otherwise excluded

or limited by the policy, which, in the absence of any

applicable exclusions or limitations, would include coverage

for damage caused by rioting, civil commotion, vandalism,

and looting, among other things. While the basic and broad

form policies only provide coverage for certain, named

perils identified in the policy, rioting, civil commotion, and

vandalism are all covered perils under these forms. Looting

is also covered under the basic and broad forms if it occurs

at the time and place of the riot or civil commotion.

The basic cause of loss form insures for certain losses

caused by the perils of fire, lightning, explosion, windstorm,

hail, smoke, aircraft, vehicles, riot, civil commotion,

vandalism, sprinkler leakage, sinkhole collapse, and volcanic

action. See CP 10 10 10 12. The broad cause of loss form

covers the aforementioned perils covered under the basic

cause of loss form and adds coverage for certain losses

caused by the perils of falling objects, weight of snow, ice

or sleet, water damage (from system or appliance leakage),

and collapse from specified causes. See CP 10 20 10 12.

For additional information about applicable ISO forms,

see ISO Form CP 10 10 10 00 (2015) - (Causes of

Loss – Basic Form), ISO Form CP 10 20 10 00 (2015) -

(Causes of Loss – Broad Form), and ISO Form CP 10 30

10 00 (2015) - (Causes of Loss – Special Form). When

presenting or adjusting a claim for losses arising from

incidents of civil unrest, it is important for policyholders

and insurers to consider the distinctions between these

potential causes of loss. While it might be natural to refer

to such damage as arising from “rioting,” or “looting” under

modern usage of those terms, the cause of loss might

more appropriately be described under the insurance policy

as a “civil commotion.” Further, one evening of rioting

would likely involve numerous incidents of looting and/or

vandalism by individual actors or groups of actors. At first

glance, one might think these distinctions irrelevant if the

policy insures against them all. But policies are sometimes

modified or manuscripted to exclude or limit coverage

for particular perils. While riots and civil commotion are

covered perils under the standard ISO cause of loss forms,

they may be excluded in particular circumstances or for

policyholders with global operations in areas prone to civil

unrest. Further, the categorization of the cause of loss may

have a tangible financial impact on a policyholders’ recovery

even if no policy exclusions are implicated, because each

of these perils (rioting, civil commotion, vandalism, looting)

may result in a different number of applicable “occurrences”

under the policy, triggering a different number of limits

and deductibles or self-insured retentions, or, in certain

circumstances, may implicate sublimits or combine with

certain other perils to limit or expand coverage. When

determining the cause of loss, it is important for the

practitioner to keep in mind that many of these terms are

not defined in the policy. But see CP 10 10 and CP 20 10

(describing vandalism as “willful and malicious damage to,

or destruction of, the described property”). Where a term

is undefined by an insurance policy, its plain, ordinary,

and popular meaning should be used. Further, under the

doctrine of contra proferentem, ambiguities are ordinarily

construed against the insurer. Id.

For more guidance on covered perils, occurrences, and

exclusions, see Exclusions in Liability Insurance: Exceptions

and Coverage, Occurrence or Claims-Made Policies,

and Number of Occurrences Determination and Insurer

Obligations State Law Survey.

For additional information about interpreting insurance

contracts, see Business Insurance Policies Interpretation

and Appleman on Insurance Law & Practice Archive § 6.1

(Contra Proferentem: Rationale and Necessity of Ambiguity).

Riot

Rioting has been defined as a tumultuous disturbance

of the peace, and “includes public disturbance or tumult

as an essential element.” North Bay Schools Ins. Auth.

v. Indus. Indem. Co., 6 Cal. App. 4th 1741, 10 Cal. Rptr.

2d 88 (1992); see also Providence Washington Ins. Co. v.

Lynn, 492 F.2d 979, 982–83 (1st Cir. 1974); Pan American

World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp.

1098, 1134 (S.D.N.Y. 1973), aff’d 505 F.2d 989 (2d Cir.

1974). There are variations in judicial interpretation of the

term “riot” and courts have raised questions as to whether

ancient criminal law definitions should be applied to terms

in modern commercial insurance contracts. Pan American,

505 F.2d at 1020–21 (discussing three different bodies

of authority on the meaning of the term riot); Couch on

Insurance §§ 152:6 and 152:16. The Second Circuit Court

of Appeals has found the most “common sense” formulation

of a riot to be when a “multitude of individuals gathers

and creates a tumult.” Pan American, 505 F.2d at 1021.

Individual acts of vandalism or arson committed by groups

of individuals acting in secret, outside the public view and

with no intent that their actions be observed, do not qualify

as a riot. North Bay Schools, 10 Cal. App. 4th at 1747–48.

A subsequent public disturbance resulting from individual

criminal acts does not convert those actions into a riot.

Providence Washington Ins. Co., 492 F.2d at 982–83 (“a

stealthy act of destruction is not transformed into an act of

riot because upon later discovery of the damage there is a

public disturbance”). Couch on Insurance § 152:16.

Civil Commotion

Civil commotion “denotes a broader, more prolonged

disturbance than riot.” North Bay Ins. Auth., 6 Cal. App. 4th

at 1746–48. Civil commotion is a named peril for ISO basic

and broad form cause of loss forms. Special form (all risks)

policies cover all risks of loss unless specifically limited or

excluded and, therefore, may not refer to civil commotion

at all. But all risks policies often list civil commotion as a

“specified cause of loss” or “named peril.” See CP 10 30

09 17. The specified causes of loss generally include

those perils covered under basic and/or broad form cause

of loss forms, including riot and civil commotion. As a

result, certain policy provisions that provide coverage for

particular types of loss (e.g., interruption of power supply)

may limit or exclude that coverage where loss is caused

by riot or civil commotion. Further, as a specified cause

of loss, in rare circumstances, riot or civil commotion may

create coverage when combined with another cause of loss

that would otherwise be excluded under the policy. The

particular terms of the policy should always be consulted to

determine the scope of coverage. Even if an all-risks policy

does not refer to the peril of civil commotion, it should be

considered as a potential cause of loss for damage resulting

from incidents of civil unrest.

For additional information, see ISO Form CP 10 30 09 17

(2015) - (Causes of Loss – Special Form).

Courts have described civil commotion as a period of civil

unrest that may encompass numerous riots and widespread

vandalism and looting. If there has been damage from

prolonged civil unrest and rioting stretching over several

days or longer, or multiple insured locations have suffered

damage over the course of one evening or more, the losses

might be more appropriately characterized as arising from a

civil commotion.

In a seminal decision, the Fourth Circuit described a civil

commotion as an “uprising among a mass of people which

occasions a serious and prolonged disturbance and an

infraction of civil order, not attaining the status of war

or an armed insurrection.” Hartford Fire Ins. Co. v. War

Eagle Coal Co., 295 Fed. 663, 665 (4th Cir. 1924). The

Northern District of Ohio characterized widespread civilian

looting and vandalism over a period of several days after

the United States 1989 invasion of Panama as a “civil

commotion.” See Sherwin-Williams Co. v. Ins. Co., 863 F.

Supp. 542, 547 (N.D. Ohio 1994), aff’d and adopted sub

nom, 105 F.3d 258 (6th Cir. 1997). In Pan American World

Airways v. Aetna Cas. & Sur. Co., the Southern District of

New York described a civil commotion as “a situation similar

to a riot but involving either a more serious disturbance or

one that is part of a broader series of disturbances.” 368

F. Supp. 1098, 1136 (S.D.N.Y. 1973), aff’d 505 F.2d 989,

1019 (2d Cir. 1974). There need not be an element of

political revolt for an event to qualify as a civil commotion.

Sherwin-Williams Co., 863 F. Supp. at 547. The term has

been said to instead involve “occasional local or temporary

outbreaks of unlawful violence” and describes a “domestic

disturbance” where individuals “gather together and cause a

disturbance and tumult.” Pan American, 505 F.2d at 1019–

20 (quotation and citations omitted). A civil commotion

does not rise to the level of an organized rebellion against

the government, however. Couch on Insurance § 152:14.

It has been said to occur “in a particular locale” but a

civil commotion could “encompass a county, a country

or an area.” Couch on Insurance § 152:14; see also Pan

American, 368 F. Supp. at 1137. Civil commotion indicates

“disturbance, disorder, turbulent crowds, and tumult having

some extension in time or space.” 368 F. Supp. at 1132–33.

See also Holiday Inns Inc. v. Aetna Ins. Co., 571 F. Supp.

1460, 1467 (S.D.N.Y. 1983).

In War Eagle Coal, the insurer claimed that a loss caused

by fire fell within a policy exclusion for “loss or damage

caused directly or indirectly by invasion, insurrection, civil

war or commotion.” 295 Fed. at 664. The insurer adduced

evidence that a worker strike and union organization

resulted in a “state of organized and continuous

lawlessness” in the county. However, the fire which caused

the loss had been set by a group of conspirators working

quietly in the middle of the night. The Fourth Circuit

rejected the possibility that the fire resulted from rioting

because there had been no disturbances or demonstrations

before the fire began. War Eagle Coal, 295 Fed. at 665.

The Fourth Circuit found a “serious question” as to whether

the losses arose from lawlessness attending civil commotion

within the county or, instead, from the actions of five

conspirators acting quietly and in secret and affirmed the

district court’s factual finding that the losses were not

caused by civil commotion and thus, not excluded. Id.

While these decisions aid in our understanding of historical

terms such as “civil commotion” and “riot,” past judicial

analyses should not preclude policy interpretations that

better comport with a modern, popular understanding of

events that arise from social unrest. Terms left undefined

by a policy must be given their popular and usual meaning.

Appleman on Insurance Law & Practice § 6.1. As the

District Court for the Southern District of New York noted

in Pan American, “[p]opular usage is a changing thing.”

368 F. Supp. at 1136 (concluding that, “if assemblages

numbering as few as three could ever make ‘riots,’ for

insurance purposes, they do not today”). While a civil

commotion arising from a single precipitating cause might

have been an entirely local event for one community

or perhaps one county at the time of the War Eagle Coal

decision in 1924 or even the Pan American decision in

1974, recent widespread social justice movements have

demonstrated that an incident in one area now may spark

civil unrest that quickly spreads across the entire nation.

At the same time, businesses have expanded operations

geographically, and communications and broadcast

technologies and capabilities have changed and expanded

significantly over time, such that civil unrest originating

in Minneapolis (e.g., civil unrest arising from the death of

George Floyd Jr.) may also be a catalyst for rioting that

results in damage to a policyholder’s insured properties

in New York, Seattle, and Houston. Distinct groups of

individuals may cause physical loss or damage to property

at each insured location, but if the losses are all connected

to one, precipitating event, it might be argued that the

losses all arise from one “occurrence” of civil commotion

and/or rioting under the policy. Conversely, it might be

asserted that the damage in each location and/or on

each separate date is a separate occurrence (whether of

vandalism, arson, looting, rioting, and/or civil commotion),

subject to separate policy limits and, potentially, separate

deductibles and self-insured retentions. Courts and

practitioners will need to remain pragmatic while defining

and applying these historical terms to modern insurance

contracts, keeping in mind standard doctrines of contract

construction, including the plain meaning rule and contra

proferentem doctrine.

For more on coverage and exclusions for riots and civil

commotion, see Appleman on Insurance Law & Practice

Archive § 6.1 (Contra Proferentem: Rationale and

Necessity of Ambiguity). New Appleman on Insurance Law

§ 43.02 (War and Other War-Like Events, Including Civil

Commotion, Riot and Acts of Terrorism, Exclusions – Losses

Resulting from Riot and Civil Commotion Are Sometimes

Excluded but Covered Under the ISO Basic Form

Commercial Property Policy). Couch on Insurance § 152:6.

Couch on Insurance § 152:14; and Couch on Insurance §

152:16.

Number of Occurrences

and Determination of Policy

Limits, Deductibles, and

Self-Insured Retentions

Under most property insurance policies, the limits and

deductibles apply on a “per occurrence” basis. If there are

multiple occurrences, there may be multiple limits and

deductibles owed, unless the policy contains language

limiting the applicable number of deductibles implicated

during a particular event. For certain risks that tend to

create continuous damage for a period of time, most

insurance policies have provisions that combine all

continuous damage within a 72-hour period into one

“occurrence” regardless of the duration of the incident

or the number of impacted locations. On the other hand,

under such provisions, a new occurrence (and potentially

another deductible) might be triggered at the end of the

defined period, if the same peril continues to cause new

damage. A 72-hour limitation is common for terrorism,

flood, and earth movement. The 72-hour limitation is also

found in many insurance policies for the perils of rioting

and civil commotion. However, some insurance policies do

not contain any restrictions on the number of applicable

occurrences for rioting and civil commotion. If the policy

does not contain a 72-hour limitation, the omission may

support the conclusion that all losses over an extended

period of time (e.g., five days) precipitated by the same

event arise from a single occurrence of rioting or civil

commotion.

Separately, the number of occurrences is also impacted by

the defined cause of loss. Numerous incidents of rioting,

vandalism, and/or looting during a prolonged period of

continuous civil unrest may all constitute a single instance

of “civil commotion” with only one policy deductible owed,

regardless of the number of impacted locations or the

length of time over which the incidents occur. If the same

losses were deemed to result from individual criminal acts

of vandalism or looting, instead of one “civil commotion,”

or one “riot,” multiple policy limits and deductibles or self-

insured retentions might apply.

For example, if five different store locations in one

metropolitan area were damaged on the same evening by

a roving group of bad actors, or by different actors during

widespread rioting and looting, it would be logical to

conclude there is still only one occurrence of rioting and/

or civil commotion, subject to one deductible, rather than

five occurrences with five separate deductibles. Likewise, if

the losses occurred on multiple, separate evenings, during

a period of continuous civil unrest precipitated by one

event, the losses could be described as having been caused

by one “occurrence,” and the damages subject to only one

deductible.

The manner in which the cause of loss is defined may

therefore have a significant impact on a policyholder’s

ultimate recovery. A practitioner should always consult the

policy’s definition of “occurrence” to determine its meaning

and potential scope in the context of property damage from

civil unrest, as well as any provisions that may combine

all damage within a particular time period for incidents of

rioting and/or civil commotion.

For additional guidance, see Business Insurance Policies

Review, Occurrence or Claims-Made Policies, and Number

of Occurrences Determination and Insurer Obligations State

Law Survey.

Potentially Applicable Policy

Coverages

Standard property policies usually provide coverage for

physical loss or damage to insured property resulting from

rioting, civil commotion, vandalism, and for looting at the

time and place of the riot or civil commotion, including

from damage to building exteriors, broken glass, and

attached signage. Certain types of property frequently

damaged in rioting or vandalism may be excluded or subject

to significant sublimits, including landscaping, outdoor

signage not attached to the building, and fences and

antennas. Civil unrest may result not only in physical loss

and damage to a building and its contents, but also may

lead to an interruption of business operations that causes

business income losses. Most commercial property policies

also provide coverage for lost business income during the

time the policyholder is repairing, replacing, or otherwise

restoring the damaged property, a period typically called

the “period of restoration.” Oftentimes, policyholders also

have extended business income coverage for a “ramp

up” period after the business has repaired or restored its

property, but before operations are back to normal and

profits back to pre-loss levels.

For more information about property insurance coverage,

see Commercial Property Insurance, Commercial Property

and Liability Insurance, First-Party Property Insurance

Policies, Making a Commercial Property Claim after Loss or

Damage, and Property Insurance Claim Filing Checklist.

For more guidance on business interruption insurance,

see Business Interruption Insurance, Business Interruption

Insurance: Post-Pandemic Litigation Developments,

COVID-19 Business Interruption Claims Litigation,

COVID-19 Business Interruption Claims Litigation Checklist,

COVID-19 Business Interruption Claims Pre-Litigation,

COVID-19 Business Interruption Claims Pre-Litigation

Checklist, COVID-19 Business Interruption Claims State

Law Survey, and COVID-19 Insurance Litigation Resource

Kit.

Another form of property coverage that is often implicated

during periods of civil unrest is “civil authority” coverage.

This may apply if a business has not suffered any physical

damage to its own property but lost access to the business

premises, and suffered resulting business income losses,

because of government-ordered closures. Civil authority

coverage applies when there is damage to other property

(not the policyholder’s) within a certain distance of the

insured business, of a type otherwise insured under the

policy, and as a result, civil authorities take action that

prohibits access to the insured location. For example, a

government-ordered street closure associated with an

adjacent collapsed building may trigger civil authority

coverage. With incidents of civil unrest, issues arise about

whether the closure was ordered by a government entity

or, instead, by a private property management company

or landlord. Issues may also arise about whether the

government closure resulted from previous physical loss or

damage within the required radius of the insured property.

This coverage may also be subject to a waiting period that

could hinder a business’s ability to recover for temporary

closures, such as evening-only closures that occur in

anticipation of nighttime rioting.

For additional information about civil authority

coverage and government-mandated closures, see The

Constitutionality of Government Action Mandating

COVID-19 Business Interruption Coverage, Fighting State

Virus-Related Insurance Coverage Mandates, Maximize

Chances of Insurance Coverage for COVID-19, and

Applying Commercial Property Insurance To COVID-19

Losses.

If the civil unrest is anticipated, a business may want to

take steps to protect its property before any loss occurs.

Some property policies provide coverage for the costs to

relocate insured property to protect it from immediately

impending physical loss or damage. Some businesses have

broader coverage for expenses incurred to take action

to temporarily protect or preserve the property from an

impending threat of physical loss or damage (e.g., boarding

up the property) and even for business income losses

for a specified period of time after such action is taken.

However, depending on the particular policy language at

issue, the policyholder will likely have to demonstrate the

physical loss or damage was imminent and/or that the

peril actually resulted in property damage. This may be

particularly complicated with a loss such as rioting, looting,

and civil commotion because of the unpredictability of

individual criminal behavior.

For additional guidance about business income losses, see

Making a Commercial Property Claim after Loss or Damage

and Property Insurance Claim Filing Checklist.