After riots, now come the insurance claims

Will insurance cover the damage and lost business income from Baltimore's riots?

On warm, mild nights, conventioneers and others typically wander down to Alexander Smith's Harbor East restaurants, Azumi and Ouzo Bay. But the staff has been turning guests away as early as 8:30 p.m. because of the time it takes to clean up and send employees home before a mandatory 10 p.m. curfew.

The curfew and the potentially long-term tarnish to Baltimore's image have been as devastating as a natural disaster to his business, Smith said. So he filed a claim with his insurance for lost income from the mandatory curfew.

"It's not any different than if a hurricane came through," Smith said. "It's really a catastrophe."

Representatives of the insurance industry said it was likely that the two financial blows — property damage and lost income — stemming from the rioting after 25-year-old Freddie Gray's death and the subsequent curfew would be covered by insurance. Most businesses carry property insurance to cover property damage. Business owners also can purchase what's known as business interruption insurance and file a claim for lost income as a result of the mandatory weeklong curfew throughout the city.

"The standard business property insurance is going to cover losses arising out of a riot or civil commotion," said Michael Barry, a spokesman for the Insurance Information Institute, an industry-funded information clearinghouse. "So one of the things we've seen here, fire, vandalism, these are all covered under the standard business property insurance policies."

Business owners typically must purchase a separate insurance, sometimes called a rider, to cover plate glass windows.

In addition to damaging an estimated 200 businesses, rioters also torched 144 cars, according to police, although some were police or other official vehicles.

Individual car owners who had optional comprehensive coverage would be able to file a claim, Barry said. Theft from looting and damage to homes from rioting also would be covered by homeowners or renters insurance, he said.

Several major insurance companies declined to comment on any claims being filed as a result of the rioting. State Farm officials said they had received a "low number" of claims so far from Baltimore and were committed to paying them.

"We certainly have the capabilities to help those who have been impacted," said State Farm spokesman Dave Phillips.

Maryland's insurance commissioner, Al Redmer Jr., urged insurance companies to expedite claims and not rely solely on police reports to confirm damage. His office said it could be a month before the total extent of the damage is known.

"I know that under normal circumstances, police reports may play a role in the adjudication of your claims," Redmer said in a message to carriers. "However, these are not normal circumstances. We are in an environment where our police resources are stretched and the writing of reports is not a high priority. We have personal and business policyholders that have been significantly affected by these events. I am asking for your assistance and flexibility during this period."

Gov. Larry Hogan said his administration is working with the federal government and the Small Business Administration "to get some money in here to help people" who didn't have insurance.

Businesses in areas deemed to be high-risk, such as the neighborhoods of Sandtown-Winchester and Penn-North that bore the brunt of the riot damage, are often covered by the state's insurer of last resort. The Joint Insurance Association, in which major insurers voluntarily pool high-risk clients together, was formed after the 1968 riots following the murder of the Rev. Martin Luther King Jr. Director Chris Dooley said the JIA had not received any riot-related claims as of Thursday.

Alex Brown, a partner at Baltimore law firm Shapiro Sher, who represents businesses in claim disputes with insurance companies, cautioned that most insurance policies include an exclusion for damages caused by "rebellion or uprising" that insurance carriers could exploit to avoid paying claims.

"I think it'll be interesting to see, particularly given the political considerations, if insurance companies start denying claims based on those exclusions," Brown said. "Whether the riot falls under the exclusion will depend on the language" in the policy.

Such exclusions were less common in homeowners insurance policies, he said.

The state of emergency and curfew declared after the riots will bolster the claims of lost income that business owners file, Brown predicted.

"If no state of emergency had been declared, insurance companies would have said, 'It's not that bad; you could have gone to work,'" he said. "I think the curfew will be of great assistance to some companies in getting lost income paid."

That's what Rob Frisch, an owner of Mt. Washington Tavern, hopes.

He filed a claim for lost income after calculating the amount the bar was losing as a result of the curfew. Frisch said he bought business interruption insurance after a fire temporarily closed the bar three years ago.

"I've been a huge advocate for it because not everybody gets it and not every insurance broker offers it, but we would not operate without it," he said.

Smith predicted city restaurants would lose millions of dollars because of the weeklong curfew and worried about the long-term harm to Baltimore's image that could keep patrons away. Normally open much later, his restaurants have been closing early to comply with the curfew, he said.

"Our kitchen needs an hour to break down," he said. "People don't realize we can't just close our doors at 10 o'clock. We have to make sure the employees are out by 9:30. It really cuts into way more of our business than what is really shown."

Barry predicted that most insurance companies would step up and pay the filed claims.

"For an insurance company this is their opportunity to shine," Barry said. "If they want to keep this costumer they're going to make sure that if the event is covered that they are paid the proper amount."

Baltimore Sun reporter Erin Cox contributed to this article.

cwells@baltsun.com

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