Businesses Trying to Rebound After Unrest Face a Challenge: Not Enough Insurance

KENOSHA, Wis. — It’s a prominent refrain these days from activists in the aftermath of arson and looting — businesses have insurance. Buildings can be repaired. Broken glass is a small price to pay in a movement for justice.

One new book, called “In Defense of Looting,” for example, argued that looting is an essential tactic against a racist capitalist society, and a largely victimless crime — again, because stores will be made whole through insurance. The top editor of The Philadelphia Inquirer resigned amid outcry for publishing the headline, “Buildings Matter, Too.”

“‘People over property’ is great as a rhetorical slogan,” the paper’s architecture critic, Inga Saffron, wrote in that piece. “But as a practical matter, the destruction of downtown buildings in Philadelphia — and in Minneapolis, Los Angeles, and a dozen other American cities — is devastating for the future of cities.”

On the burned-out blocks hit by unrest since the killing George Floyd, an unarmed Black man, in Minneapolis in late spring, the reality is complicated. Mr. Floyd’s death was the start of months of protests for racial justice led by the Black Lives Matter movement that have left long-term economic damage, especially in lower-income business districts.

While large chains like Walmart and Best Buy have excellent insurance, many small businesses that have been burned down since the riots lack similar coverage. And for them, there is no easy way to replace all that they lost.

In Kenosha, more than 35 small businesses were completely destroyed, and around 80 have been damaged, according to the city’s business association. Almost all are locally owned and many are underinsured or struggling to manage.

“It’s a common problem, businesses being underinsured, and the consequences can be devastating,” said Peter Kochenburger, executive director of the Insurance Law LL.M. Program and a University of Connecticut law professor.

“We can’t call corporate,” said Ricardo Tagliapietra, who owns three restaurants in Kenosha. “There’s no backup.”

When people started burning down buildings in Kenosha after the police shooting of Jacob Blake on Aug. 23, Tony Farhan prayed that his electronics shop would be left alone.

The Farhans have struggled economically in recent years. Mr. Farhan, his wife and their four sons moved in with his parents while their savings went to one son’s health care. Mr. Farhan’s ambition for a better life was tied up in the shop. So were many of his family’s belongings. They couldn’t fit all the clothes and toys for their boys in the crowded house they shared with his parents, so they tucked things away into the shop storage room. “Half my house was in there,” said Mr. Farhan, 36, who grew up in Kenosha.

The shop, which sells cellphones, charging cords, headphones and speakers, was looted on the night Mr. Blake was shot and burned the next. So was his brother’s shoe and clothing shop next door. The apartment units upstairs burned with them, as did many other buildings in the working-class neighborhood of Uptown Kenosha, a historic and bustling multicultural neighborhood. Weeks later it remained a scene of char and rubble.

They have insurance, though they say it is not enough, and now they are tangling to get the money. But personal items they stored in the shops were not insured, they said. Mr. Farhan does not know how he will pay to replace his children’s winter clothes that were in a storage room.

“I have no job, and I’m using credit cards,” said Mr. Farhan, who is of Palestinian descent. “I’m going into debt, and I just got out of debt.”

Mr. Farhan’s brother Vinnie, 40, who had the shoe and clothing shop next door, said the logistics of wrestling the insurance companies and restarting his life were overwhelming. “People don’t see behind the scenes. I put everything into starting this business.”

In the units above the Farhans’ shops, all the tenants made it out alive, but several family pets died in the fires, the brothers said. One upstairs resident started an online fund-raiser the brothers highlighted: “My mom and I lost everything and our 2 cats and now my mom is homeless and I would like to try to raise money to help her with getting a place,” the tenant’s daughter, Ashley Powell, wrote on the GoFundMe page.

Mr. Farhan, hoping some of the insurance and redevelopment grants will come his way soon, said he recently borrowed $20,000 to buy a new storefront nearby to start again.

It is unclear if the looters and rioters in this town — or the ones that tore through the commercial districts of Minneapolis, Los Angeles and Chicago — were genuinely committed to the Black Lives Matter movement or just taking advantage of a chaotic situation after the police shooting of Mr. Blake, which is now being investigated by the U.S. Department of Justice.

But the topic is a difficult one to broach even for the riots’ victims: Many on the left decry anyone who criticizes looting, arguing that it is a justifiable expression of rage, widely quoting (out of context) the Rev. Dr. Martin Luther King Jr. that “a riot is the language of the unheard.”

At a recent antifa gathering in Portland, Ore., protesters shared literature arguing for the righteousness of property destruction with titles like “Why Break Windows.”

In a media critique earlier this year published on the website Refinery29, Britni de la Cretaz wrote: “Putting the focus on stealing objects from a store (during a pandemic, no less!) rather than on the injustice behind the looting, the horrific loss of life and racial violence that Black folks live with every day, is sending the message that property matters more than people. It just demonstrates the way that white supremacy sees more value in a TV set than in the life of a Black man.”

And Preston Mitchum, an adjunct professor at Georgetown University Law Center and the co-chair of Collective Action for Safe Spaces DC, said in an interview: “Businesses will be OK. You can revive a business. You can’t bring back people who are killed by the cops.”

Within the argument that looting is a minor issue is the assumption that property owners can easily replace what was lost. But many of the small businesses in Kenosha’s lower- and middle-income Uptown neighborhood will not receive enough in insurance proceeds to fully replace destroyed property. And many business owners across Kenosha describe the losses in more personal ways.

“We lived here, basically,” said Scott Carpenter, the owner of office furniture supply shop B&L Furniture, whose family has run the shop for 40 years and which is just a few blocks away from the Farhans’ stores. “It was our home away from home.”

It is now burned out, a couple walls still standing around the melted core. The office furniture is gone, of course. And so is the play area in the corner with games and old NASCAR memorabilia he and his father built for local kids. His family owned the building and has insurance, and he estimates the cost to rebuild will be around $1.5 million. He plans on reopening in a rented location four miles away in a neighborhood he thinks is safer.

One pattern that emerged in the aftermath of the riots in Kenosha: Many white-owned businesses like Mr. Carpenter’s had better, more comprehensive insurance and records than those owned by people of color, according to several leaders in the business community.

Still, the pain was broadly felt. At the local used tire shop, the owner, Linda Tolliver, who is white, is waiting for new windows to replace those broken in the riots (her landlord’s insurance is covering it). In the meantime, she estimated she was paying about $800 extra each month to heat the shop, which now lacks proper windows, and she is working all day behind plywood without natural light. So Ms. Tolliver said she was making do with less — cutting back on employee hours and forgoing the new winter uniforms her workers need.

The night after her shop was broken into, she stayed inside to guard it and watch what was happening. She was shocked, she said, to see so many white protesters destroying property in the name of Black lives. And they seemed to be well-off young people, with little sense of what a storefront means to a family like hers.

“It’s some blue-haired, latte-drinking hippie in Seattle coming here to raise hell while they go home to their nice beds,” said Ms. Tolliver, who is in her late 50s. “They don’t care about any of us.”

Few city leaders fault the business owners for not buying more comprehensive insurance policies.

“Nobody expected this in little Kenosha,” said Jennifer Dooley-Hogan, a local marketer who is the president of Downtown Kenosha Inc., which is working to raise $300,000 in grants to help businesses damaged during the riots.

A season of downturn and pain

A city of about 100,000 built along Lake Michigan, Kenosha has seen hard times. In 1988, most operations of the local Chrysler plant were shut down, and the city lost 5,500 jobs. But it slowly came back to life, with companies like Haribo candy, Uline shipping specialists and Nexus pharmaceuticals opening or expanding in town.

This summer, Mr. Tagliapietra, the restaurant owner, and his partners had opened a high-end downtown attraction, a symbol of its economic rise: the Apis Hotel and Restaurant, with entrees like coriander braised lamb shoulder ($20) and raviolo al’uovo ($18).

Then two forces hit: the pandemic, and the economic damage to the budding hospitality and shopping district.

On Aug. 23, Mr. Blake was shot by a white officer. The video showed the officer shooting him in the back seven times as he got into his car. News spread that he had been trying to break up a fight and that he was unarmed. The facts that ultimately emerged about the encounter were more complex, but the viral video of the shooting was damning. Another unarmed Black man had been attacked by police.

Kenosha erupted. That night, antiracism protests turned into riots that lasted for days.

The city’s lower- and middle-class business owners were ultimately hit harder than the more affluent. When the riots started on a Sunday night, Kenosha’s wealthier and whiter Downtown organized quickly to board up the storefronts, thanks to a longstanding tight-knit business association. By the next morning at 7, hundreds of volunteers were gathering with hammers and nails. Those who couldn’t hammer came with water and sandwiches. Several shops had already been looted and damaged. But mostly, the area was protected.

Uptown Kenosha, a less affluent area, did not have a well-resourced tight-knit business association. Many shop owners could not afford to buy the plywood boards to protect their businesses in time, though Downtown quickly came to help both financially and physically with volunteers. Still, block after block burned over the course of the week. Protests continued long after the nights of fire and looting, but they became more quiet and peaceful. Now, old exterior walls of stores still stand uptown, but inside many shops are just piles of bricks, melted plastic and twisted chairs.

This is why the insurance question is key.

One company that became an iconic local scene of the destruction is Car Source, which sells used cars. Some 140 vehicles in its lot were destroyed by arson. The family that owns the lot, of Indian descent, estimates the damage at $2.5 million. They have been fighting with their insurer, which initially attempted to classify the damage as the result of a domestic terrorism incident — an event not covered by their plan, said Anmol Khindri, whose family owns the business. Most of their business records were destroyed in the fire, and many of the car VIN numbers were burned off, making it hard to prove how much was lost. The family hired a lawyer to help (the lawyer takes a percentage of whatever is paid out).

“I’m keeping my expectations low,” Mr. Khindri said. “I’m already broke. I’ve got no money. It’s been total loss.”

Even many of the businesses with good insurance will not be able to rebuild without outside donations or loans.

“There’s a huge divide between the replacement cost and the insured cost,” said Heather Wessling Grosz, the vice president of the Kenosha Area Business Alliance. “The ability to replace those buildings on those blocks will be very difficult. It is out of reach for most of them.”

Many small businesses choose insurance that covers the cash value of their building or products rather than the actual replacement cost, which can be considerably higher.

“Let’s say you have a 10-year-old washing machine, and maybe it was $500 to buy and a new one would cost $600, but it’s depreciated, so now it would have a value of $50,” said Mr. Kochenburger, the insurance law professor. “So you’re not getting either the cost you paid for it or what it would cost to replace it. That’s what happens.

“It costs more to get replacement coverage, so this issue is going to bear more of an impact on lower-income folks where every dime really counts, and they opted for the less expensive plan,” Mr. Kochenburger said. “It is not intuitive how this works.”

The government is sending $4 million in aid to be distributed by the Kenosha Area Business Association, but the city’s fire department estimates that damages from the late August riots are around $11 million. Local accountants are volunteering to help business owners navigate the daunting insurance bureaucracy.

“Larger businesses have risk managers who tell them exactly what type of coverage to buy, what the risks are, what liability insurance to have,” said Loretta Worters, a vice president at the Insurance Information Institute, a nonprofit industry association. “A small business has to be their own risk manager, and they don’t know the right stuff, and that’s a big problem.”

The Rev. Jonathan Barker, who leads Grace Lutheran Church, said the riots hit Kenosha’s most vulnerable population. And he added that they tapped into an existing racial tension in the neighborhood. Although there are many Black residents, most of the shops are owned by Middle Eastern, Asian and Latino families.

Some businesses will never bounce back, said Mr. Tagliapietra, who has been involved in citywide discussions on redevelopment. He has seen plans to fully redevelop Uptown and the surrounding area, an idea that existed before the riots but which now is more feasible.

“When you look at Uptown, no matter how it gets rebuilt, businesses there are never going to be able to afford it again,” he said. “It’s instant gentrification.”

Nowadays, at the Uptown site where the Farhans had their shops, there are just high piles of charred objects and melted plastic: cellphone cases, electronics cords, appliances and brightly colored pieces of children’s clothing sticking out among piles of blackened wood and bricks.

At the Car Source lot, the vehicles are now just rusted pieces of metal, with seats completely burned through to their frames. On the hood of four cars, someone has written in graffiti: Black — Lives — Matter — ♥.

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