This last summer and fall the nation’s eyes were on Ferguson, Missouri, the circumstances that surrounded the death of Michael Brown, and the reaction of the community there. While the media focused primarily on the flaws of law enforcement and the legal system, nationally many small business owners watched with concern at how their counterparts – the entrepreneurs of Ferguson – dealt with the increasing threat of violence and mayhem.
The first round of rioting occurred in August with far less damage. Insurance claims for that period came to less than $250,000. Still, it was apparent that Ferguson was expecting worse, and the riot damage Ferguson business owners experienced in November after a grand jury declined to indict Darren Wilson for the murder of Brown was far more extensive. Just the damage from the looted and burned QuikTrip is estimated to be in the seven figures.
Of course, Ferguson is not the only city that has experienced looting and destruction. The Los Angeles riots in 1992 resulted in insurance payouts of more than $775 million. However, after the riots, many of the Koreans doing business in L.A. closed their doors anyway as the experience had been too traumatic and too expensive and had revealed systemic problems they felt would not be addressed.
How are small business owners affected by instability in the community or riots? There is no straightforward answer, particularly in the long term, but insurance experts have weighed in on Ferguson and said that company owners who had purchased business owners insurance would very likely have their losses covered. It is always a smart idea for business owners to go over their policies carefully and consult with their insurance agents well in advance of a man made or natural disaster, adding on any supplementary types of insurance to cover areas of potential risk. A jeweler will no doubt take security precautions, including insurance, to protect his investment in gemstones and precious metals, while being entirely unaware of his lack of coverage for a sewer backup.
Another insurance to have in any situation that could leave behind destruction would be business interruption insurance which covers damage extensive enough to cause a business to close for a period of time. For business owners like Sonya Roberts, who ran a liquor store in Ferguson, this kind of coverage would make a real difference as governments and insurance companies grapple with how all of the destruction will be cleared away and how the community will be rebuilt – and who will pay for it.
Fortunately, most entrepreneurs will not have to face a situation like the riots in Ferguson during their business careers, but it’s the rare entrepreneur who will not have a large and expensive problem to deal with at some point. It is always wise to consider any and all risks a business might face and plan accordingly – far in advance.