The riots in the spring of 2020 lead to a number of insurance claims. I was interviewed on Fox News about these, as mentioned in
Business income and compensation claims payable following riots and civil disturbances. We are now starting to receive some coverage opinions on unresolved claims.
A recent Minnesota federal court opinion1 analyzed under Minnesota law involved a business income coverage controversy stemming from the George Floyd riots. The complaint stated the facts:
George Floyd was murdered on May 25, 2020, leading to significant civil unrest. Mr. Floyd’s murder happened near the NMA laundromat. “Cement barricades, ad hoc barricades, ad hoc structures and memorials commemorating the death of George Floyd were placed in George Floyd Square, at and adjacent to [laundromat’s] premises after May. Specifically, the barricades were placed “by the City of Minneapolis on Chicago Avenue north and south of the NMA and on 38th Street east and west of the NMA . . . [in] response to the emerging civil unrest and resulting property damage in south Minneapolis.̵
7; The barricades, “memorials and ad hoc structures remained in place continuously for over a year.” The placement of these barricades, memorials and structures “on the street, in parking lots and in the bus stop caused a partial shutdown of NMA’s business operations.” “To access the NMA via 38th Street or Chicago Avenue, vehicles must be admitted through a gate or ad hoc barricades.” “The NMA also lost parking spaces and a public bus stop as structures were built on and adjacent to the premises and memorials commemorating George Floyd were placed throughout George Floyd Square.” “The barricades and armed and unarmed community members physically blocking access to the NMA with their bodies diverted pedestrians, traffic and public transport away from the NMA.”
The court noted the general outage coverage language as follows:
The actual loss of business income you suffer due to the necessary “suspension” of your “operations” during the “recovery period” . . . caused by direct physical loss of or damage to property on premises described in the declarations and for which an insurance limit for business income and extra expenses is specified in the declarations. The loss or damage must be caused by or arise from a covered cause of loss.
The court also noted the policy definitions applicable to this coverage:
The policy defines “business” as the insured’s “business taking place on the described premises.” ‘Suspension’ is defined in relevant part as: ‘The partial or complete cessation of your business activities.’ And ‘recovery period’ ‘means the period of time after direct physical loss or damage caused by or arising from a covered cause of loss of [insured’s] premises that [b]own. . . 72 hours after the time of direct physical loss or damage for business income coverage.’ The recovery period ends on the earlier of ‘[t]he date when the property . . . should be repaired, rebuilt or replaced with reasonable speed and similar quality; or [t]the date on which business resumes at a new permanent location.’ The “premises described in the declarations” are the Laundromat’s address at 3725 Chicago Avenue South in Minneapolis.
The claim was also made under the civil authority cover which in part provides:
(1) When a covered cause of loss causes damage to property other than property on the described premises, we will pay for the actual loss of business income you incur and the actual additional costs you incur due to civil authority action that prohibits access to the described premises, provided that both of the following apply:
(a) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but not more than one mile from the damaged property; and
(b) The civil authority’s action is taken in response to dangerous physical conditions resulting from the damage or the continuation of the covered cause of loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged real property.
The policyholder made a rather unique argument that the barriers were the physical damage to the premises:
The NMA claims that it experienced direct physical loss in three ways: “i) Placement of memorials in memory of George Floyd in the NMA parking lots, in the bus stop and on the sidewalk; . . . ii) Placement of structures on the street and in parking lots. and (iii) “loss of direct vehicular and pedestrian access . . . caused by the actions of armed and unarmed members of the public who physically blocked access to NMA premises with their bodies, supplemented [City-placed] cement barricades with their own ad hoc barricades and directed vehicular and pedestrian traffic away from [] local.’ Second Am. Compl. To be clear, the NMA does not claim that the placement of these structural and human barriers caused physical damage to property; The NMA claims that the barriers themselves are physical damages.
The court disagreed that the barriers could be physical harm:
These allegations do not reasonably demonstrate loss or damage in the relevant sense to either the Laundromat or the general area around the Laundromat. Barriers are usually not in themselves physical property damage. They can divert vehicular or pedestrian traffic away from damage or areas in need of repair—such as a street with potholes or a closed escalator—but it seems unlikely to refer to a barrier itself as physical property damage. The NMA does not cite any case that reaches that or a similar conclusion. And as noted, NMA alleges no facts in its Second Amended Complaint to suggest that the barriers or memorials in the plaza caused any separate physical injury.
The NMA, perhaps realizing that this aspect of its theory of the barriers is not strong, swung at the hearing to argue that the duration of the barriers’ presence resulted in direct physical loss. This is not persuasive because the duration of the restricted access caused by the barriers is not physical loss or damage under any definition of these terms. In other words, if the barriers are not themselves physical damage to property on day one, it is hard to see how (if not more) they become so after day one hundred.
The court disagreed that the civil authority’s coverage applied because no civil order ever prohibited all access to the premises:
The primary disputed issue regarding the civil agency’s coverage is whether the NMA has alleged facts that likely show that the city “prohibited” access to the laundromat. The general rule is that coverage under this provision “is available only when access is completely prohibited,” and that allegations or evidence showing that “availability was reduced” do not establish that access was prohibited. TMC Stores, Inc. v. Federated Mut. ins. Co., no. A04-1963, 2005 WL 1331700, (Minn. Ct. App. June 7, 2005); see Southern Hospitality, Inc. v. Zurich American Ins. Co., 393 F.3d 1137, 1139– 1142 (10th Cir. 2004)…
For those readers who are interested in this coverage topic, I would suggest reading Are damages to businesses from recent riots and civil strife covered under property insurance policies?and a post by Shane Smith, Coverage for riots or civil insurrections.
Today’s thought
This is a time of shame and sorrow. It is not a day for politics. I have saved this opportunity to speak to you briefly about this mindless threat of violence in America that is once again coloring our country and all of our lives.
It’s not a race thing. The victims of the violence are black and white, rich and poor, young and old, known and unknown. They are, most importantly, people that other people loved and needed. No one—no matter where he lives or what he does—can be sure who will be the victim of any senseless bloodshed. And yet it goes on and on.
Why? What has violence ever accomplished? What has it ever created? No martyr’s cause has ever been settled by his assassin’s bullet.
No wrongs have ever been righted by riots and civil unrest. A sniper is just a coward, not a hero; and an uncontrolled, uncontrollable mob is only the voice of madness, not the voice of the people.
—Robert F. Kennedy, April 5, 1968
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1 NMA Investments v. Fidelity and Guaranty Ins. Co.No. 22-cv-1618 (D. Minn. Sept. 13, 2022).
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