De ja vu: Business Interruption Litigation in D.C. after the Martin Luther King Riots
Baltimore is not the first place afflicted by riots that caused coverage disputes. After the Martin Luther King riots in 1968, D.C. had a series of cases involving business interruption coverage and the government's curfew. (When I checked, I did not find any involving Maryland, but I can't imagine that none took place so I need to find time to check again.)
In Bros., Inc. v. Liberty Mutual Fire Insurance Co., 268 A. 2d 611 (D.C. App. 1970), the D.C. Court of Appeals considered whether riot coverage included losses caused by the government imposing a curfew and banning alcohol sales. Although Bros. Inc. had not been damaged by the riots directly (the riots had occured miles away), the curfew had cost Bros. Inc. a lot of money. They had business interruption coverage. Hence the lawsuit.
After deciding that riot coverage only meant physical damage from the riot, the Bros. Court then analyzed the Business Interruption policy form. The Business Interruption form covered losses to business income caused by physical destruction of the property as well as when "as a direct result of damage to or destruction of property adjacent to the premises, access to such described premises is specifically prohibited by order of civil authority." Bros. Inc. argued that this included the curfew, but the Court rejected this argument. Bros. Inc. had not alleged that their property or adjacent property had been physically damaged or destroyed (because the property had not been in point of fact destroyed), so it was not covered.
In a subsequent case, Two Caesars Corp. v. Jefferson Insurance Co., 280 A. 2d 305 (D.C. Cir. 1971), the D.C. Court went further. It held that the curfew itself was imposed not because of the riot but "to achieve a compelling and legitimate governmental objective — that of facilitating the movement of police and fire fighting equipment during an actual or anticipated emergency." That meanst there was no coverage. In the Two Ceasars policy, coverage only existed when "the Order of Civil Authority, which prohibits access, is predicated upon damage to or destruction of the business property." Since the curfew was not caused by damage to the business property, there was no coverage.
Both these cases based their reasoning not on a Ordinance or Law exclusion, but on reading the causation section of the BI policy. So they're probably obsolete (at least for ISO forms). Reading ISO CP 00 30 04 02 (2001) (a somewhat old Business Interruption form close to hand), ISO policies have different language.
Civil Authority. We will pay [for loss of Business Income] caused by action of civil authority that prohibits access to the described premisses due to direct physical loss of or damage to property, other than at the described premises, caused by or resutling from any Covered Cause of Loss.
This provides coverage on its face, but the D.C. Court never considered how this coverage for "action of civil authority" interacts with the "Ordinance or Law" exclusion. (It did not need to because there was no coverage on the policy's face.) That's the topic for another time (although at first glance, the Business Interruption policy incorporates the Causes of Loss forms, which include the Ordinace and Law exclusion.