Empire State Today

Small business owners are learning the limitations of business insurance during the pandemic and the protests that have sprung up and continued after the death of George Floyd.

For Drakari Donaldson, owner of California Street Cannabis in San Francisco, the damage done on May 30, by more than a dozen individuals with hammers and bricks, the smashed windows and countertops, and the looting of around $10,000 in cannabis products, may not be covered by the insurance he purchased to protect his business from unexpected events.

The windows are still blocked with scrap metal and boards placed on June 1, because there’s a shortage of window repair. 

“I’m waiting to hear back about what the insurance will cover,” he said. 

He’s hopeful they’ll be covered, but he doesn’t know for sure.

Small businesses have been decimated by the decline in revenue, supply chain shortages, and then losses from curfews, protesting and looting.  

Property Claim Services, an insurance-industry data monitor that specializes in catastrophes, estimates the total cost for Minnesota insurers is a minimum of $25 million. Income losses for small business across the country could be in the range of $255-$431 billion each month.

Because insurance isn’t required, many small businesses forgo that expenditure, focusing on what is required by the federal guidelines: Workers’ compensation, unemployment and disability insurance.

Even for businesses that do have interruption insurance, the damage from looting may not be covered.

According to Kirk Pasich, a partner at Pasich LLP Insurance Recovery Group, insurers may pay out for physical damage, although income losses connected to protests (including looting or curfews) is often not covered. 

“They say, you’re already losing money because of COVID. So we don’t have to pay you because you can’t lose the same money twice,” Pasich said.

There’s also a virus inclusion, which has been in many small business policies since 2006: If the business income loss is deemed virus-related, there’s no payout. Of course, you can appeal a rejection, Pasich said. He argues that business income loss due to the closures aren’t virus-related, but that the losses are due to the government stay-at-home orders.

Property insurance for a business covers broken glass and product theft, among other elements. Loss of business income covers rent, licensing and associated costs while the store is shut. This also applies to loss of income due to civil authority, meaning that income lost due to government shutdown orders or curfews would be covered up to the limit of the policy.

“If you were making $100,000 a year, and you were shut down, you might get $100,000 from your insurance for your loss of business, and you might get the insurance to pay for the actual physical loss of your profit,” Pasich said.