When a business or commercial property has been vandalized, it can cause problems for not only the company’s owner but also its employees. This specific kind of damage can seriously harm a business’s reputation and leave owners dealing with costly repairs. Although commercial property insurance can cover some damage costs, there are specific policy stipulations policyholders must be aware of, should their business be impacted by vandalism.
In many cases, commercial property insurance provides coverage for acts of vandalism. When reviewing different coverage options, it’s essential to seek comprehensive coverage. For instance, if a business is located in an area with heavy foot traffic or is prone to vandalism, ensuring that your insurance covers damage caused by vandalism should be a priority.
Commercial Property Coverage for Vandalism
Insurance coverage for vandalism is most commonly known as vandalism and malicious mischief coverage. Vandalism and malicious mischief occur when behavior causes intentional injury or destruction of property. While vandalism is purposeful damage caused to someone else’s property, malicious mischief may not have been intended. Certain acts, however—such as egging a property—toe the line depending on the outcome.
Vandalism and malicious mischief insurance coverage protects against losses sustained due to vandals’ actions. This coverage is included in most basic commercial property insurance policies; however, if your business property is unoccupied during certain periods of the day, such as is the case with many churches and schools, then a higher deductible typically applies to vandalism and malicious mischief coverage because vandals often know there is a reduced risk of being caught.
Vandalism and malicious mischief coverage are typically written as a policy endorsement or rider to a standard commercial property policy. Landlords, in particular, can benefit from this type of coverage, primarily if some of their properties are in areas prone to vandalism and crime.
Often, vandalism cases are considered events that can leave windows broken or graffiti covering storefronts. However, a vandalized business can have a broader effect than just the property’s aesthetics. For instance:
- Damaged or broken company vehicles and machinery can bring a business to a complete standstill. Broken or damaged technology cannot keep track of a company’s orders, and broken computers often leave employees unable to complete their jobs. Damage like this can force a business to operate outside its primary location while repairs are done, causing significant slowdowns or even complete stops in production.
- If additional space is needed while the vandalized property is repaired, operating costs can increase, with additional rent, supplies, and needed repairs to bring the primary property back to operation.
- A business can lose sales at vandalized brick-and-mortar storefronts. If vandalism or a break-in happens, the news will likely spread throughout the community, and customers may be hesitant to return out of fear. This can lead to decreased cash flow for an already disrupted business.
What is Covered by Vandalism and Malicious Mischief Coverage
Most standard commercial property policies cover vandalism and/or malicious mischief. Typically, the following losses are covered with the purchase of a vandalism and malicious mischief policy endorsement:
- Damaged storefronts
- Interior damage caused by vandalism
- Broken windows
- Graffiti
- Looting
- Riots
- Civil commotion
- Debris removal
Here are some key points to consider regarding coverage for damage caused by vandalism and malicious mischief:
- Property Damage: Damage to business property, including buildings, equipment, inventory, and other assets resulting from vandalism, is most often covered. This can include damage caused by graffiti, intentional destruction, and/or other malicious acts.
- Repair or Replacement: If a business is vandalized, the costs associated with repairing or replacing the damaged items are generally covered. However, it’s important to note that some policies may have specified coverage limits.
- Contents Coverage: The contents of a vandalized business are also covered under the endorsement of the vandalism and malicious mischief policy. Items like inventory, equipment, furniture, and other items damaged or stolen due to vandalism are protected. Typically, coverage can reimburse property owners for the value of damaged or stolen contents up to the coverage limits outlined in the policy.
- Business Interruption: In some instances, businesses that suffer losses due to vandalism must temporarily close for repairs. A business interruption policy is essential for owners in these cases, as it can help provide for lost income and ongoing business expenses during the period the property is inoperable.
What is Not Covered by Vandalism and Malicious Mischief Coverage
Despite the many ways in which theft and vandalism are covered by insurance, there are instances where certain acts are not covered. Vandalism and malicious mischief losses are not covered if a place of business has been left unoccupied for 60 or more consecutive days. This can be particularly concerning for companies that use their office space infrequently.
Additionally, vandalism committed by the business owner or anyone else listed as a policyholder is not covered, including a disgruntled employee or former business partner who has not yet been removed from the policy. If things within the business relationship go south and the owner has not updated the policy, they are still technically a policyholder. Should the former employee decide to return and trash the business, coverage will most likely be denied due to it being an intentional act committed by the policyholder.
Common Reasons Why Vandalism Claims Are Denied
In most instances, a commercial property policy covers losses caused by vandalism, mischief, riot, civil commotion, and/or looting. However, commercial policies offer coverage on either a named or all perils basis. Named perils refer to coverage for a specific loss form explicitly listed in the policy. All risk policies, however, cover all forms of loss except for any explicitly excluded.
Although many types of vandalism are explicitly covered under commercial vandalism and malicious mischief endorsement, many related claims are denied for various reasons. Often, insurance companies require proof from policyholders that they minimized the risk of vandalism before it occurred. If the business owner can prove they have installed security devices, good lighting, and adequate locks, the insurance provider is more likely to accept the claim.
Unfortunately, even with the proper precautions, an insurance carrier can still wrongly deny or underpay a valid vandalism claim through bad faith tactics. Most often, vandalism claims are denied because the commercial policyholder:
- Cannot prove ownership of the claimed items
- Cannot prove that a break-in or vandalism occurred
- Does not know the value of the claimed items
- Failed to perform preventative maintenance
Proper documentation of all items that may have been impacted by vandalism and ensuring adequate security measures are in place ahead of time can help policyholders better ensure their claim is accepted for payment. Additionally, if vandalism has occurred at a commercial property, one of the most critical steps is to file a police report. Having a police report on hand is invaluable to the claims process, and insurers can outright deny coverage without one. This is because a police report provides an official record of the incident, including a law enforcement officer’s opinion regarding the vandalism, and can be used as further proof of property damage. The report should include a list of stolen or damaged items, and the policyholder should ensure that the list matches the items claimed by their insurance company.
Unfortunately, even with all appropriate safety measures in place, proper documentation, and a police report on file, valid commercial property vandalism claims can still be denied. Insurance companies can utilize various bad faith tactics in attempts to abandon their obligations and responsibilities to their policyholders. These tactics are often used to financially benefit the company by refusing to pay a legitimate claim or even investigating and processing a claim within a specific time.
Despite presenting themselves as professional organizations with a policyholder’s best interests in mind, insurance companies are ultimately for-profit organizations. Insurance companies profit by collecting insurance premiums and lose money when they have to pay out on claims.
Because of how this business structure works, it, unfortunately, encourages some carriers and claims adjusters to engage in bad faith practices for their financial gain at the expense of policyholders. When this happens, it is in the best interests of a policyholder to obtain legal counsel. An insurance coverage attorney experienced in commercial property claims can file a bad faith lawsuit in court and ensure the policyholder receives the money needed to repair their property and get back to business, as well as any statutory or other legal penalties to which they are entitled under state and/or federal law.
Commercial Property Insurance Claim Attorneys
Acts of vandalism that lead to commercial property damage can devastate business owners. If a valid vandalism claim is denied, it can put business owners in a difficult situation that they may not know how to navigate without proper representation. Commercial property damage caused by vandalism affects countless businesses each year. At Raizner Slania, we understand that your business is an investment, and dealing with a commercial property damage claim can hurt your livelihood and your return on investment.
Many business owners have property insurance policies to protect their commercial buildings from damage and loss. If your commercial insurance carrier wrongly denies you proper compensation for a loss, you could have a claim.
