Business Interruption Coverage, Riots, Curfews, Wars and Military Action, and the Ordinance or Law Exclusion

May 4, 2015

The Baltimore Sun ran an article over the weekend that discussed business interruption insurance coverage because of the riots. That article took the view that the major problem is the war exclusion. I don't see that. The real problem is the Ordinance or Law exclusion.

 

Why I doubt Insurers will use the "War and Military Action" exclusion

 

The "War and Military Action" Exclusion (ISO Form CP 10 10 06 07 (2007)) excludes coverage for damage caused directly or indirectly by:

 

(1) War, including uncdeclared or civil war;

(2) Warlike action by a military force, including action in hindering or defending against actual or expected attack, by any goverment, soveriegn or other authority using military personnel or other agents; or

(3) Insurrection, rebellion, revolution, usurped power, or action taken by government authority in hindering or defending against any of these.

 

Insurers could argue that the recent riots were actually a civil war and excluded under (1). Or that the curfew was an "action in hindering or defending against actual or expected attack" and the rioters were an "other authority using military personnel or other agents" and excluded under (2). Or that the riots were actually an "insurrection, rebellion, revolution, [or] usurped power" and the curfew was a government action fighting back and therefore excluded under (3). 

 

But these arguments fail the blush test. The first two are clearly intended to cover wars. Like the Syrian Civil War or the Iraq war. Things like that. The third is marginally easier. "Insurrection, rebellion, revolution [or] usurped power" all describe people attempting to overthrow the government. E.G. The American Revolution, the French Revolution, the Russian Revolution, the Civil war. The only evidence for this is a hashtag. #BaltimoreInsurrection.  I just don't see it.

 

Why I think they'll use the Ordinance or Law exclusion instead

 

It's also pointless because there is another exclusion. The Ordinance Or Law exclusion (ISO Form CP 10 10 06 07 (2007)) excludes coverage for damage caused directly or indirectly by the following:

 

The enforcement of any ordinance or law:

 

(1) Regulation the construction, use or repair of any property...

 

This exclusion, Ordinace or Law, applies whether the loss results from: 

 

(a) An ordinace or law that is enforced even if the property has not been damaged. 

 

Reading Black's Law Dictionary (10th ed.), "Ordinance" means "An authoritative law or decree; specif. a municipal regualtion, esp. one that forbids or restricts an activity." "Law" has a complex definition that includes everything from (1) "The regime that orders human activities and relations through systematic application of the force of politically organzied society...; the legal system" to "(2) The aggregate of legislation, judicial precedents, and accepted legal principles;... <the law of the land>" to "(5) A statute". There is some room for ambiguity, but the curfew proclamation is probably a municipal regulation or at least some kind of law. 

 

If the curfew is excluded, any harm "caused directly or indirectly" by it is excluded "regardless of any other cause or event that contributes concurrently or in any sequence to the loss."

 

Why bother trying to make the implausible and politically charged argument that the riot was actually an attempt to overthrow the government when you can get out of business interruption coverage with the Ordinance or Law exclusion?

 

 

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