On April 27, 2015 protests in Baltimore, Maryland regarding the death of Freddie Gray escalated into violent riots. These riots resulted in extensive and significant property damage throughout the city. Often, such damages are covered by insurance companies that insure the affected properties. In the aftermath of such events, questions arise as to whether any governmental entities can be held liable for these damages and whether insurance companies may bring subrogation claims against such entities. Maryland addressed the first question in the aftermath of the Baltimore bank riots of 1835 and enacted legislation specifically addressing governmental liability for damages caused by civil disorder. See MD. PUBLIC SAFETY CODE ANN. §§ 14-1001 et seq. (2014).
This statute is referred to as the Riot Act, and it allows individuals who suffer property damage during a riot to bring a claim for the actual value of the damages against the county or municipal corporation of the State in which the riot occurred. See id. § 14-1001(b). In order to recover under the statute, a potential claimant must prove that a county or municipal corporation (1) had good reason to believe the riot was about to take place or had sufficient notice to prevent the damages; and (2) had the ability to prevent the damages. See id. §14-1002(a)(1), (2). The claimant may not recover, however, if the county or municipal corporation can prove that it used reasonable diligence to prevent or suppress the riot. See id. § 14-1002(b). The statute only references a claim for “the injured party” and does not explicitly state whether this claim extends to insurance companies that are subrogated to their insureds’ rights. See id. § 14-1001(b) (2014).
Maryland courts have addressed this issue and determined that insurance companies may bring subrogation claims pursuant to the Riot Act. See Mayor & City Council of Baltimore v. Blibaum, 280 Md. 652 (1977). In Blibaum, the Maryland high court held that an insurance company could use a prior, but substantively identical, version of the Riot Act to bring a subrogation claim against the City of Baltimore for damages to the insured’s property during a riot. See id. at 664. The court explained that an insurer could bring a subrogation action even though the statute granted a cause of action to the “sufferer” and did not expressly mention insurers. See id. at 658. The statute did not preclude subrogation actions because, unlike similar riot statutes in states such as Pennsylvania and New Jersey, the Maryland statute was grounded in negligence as opposed to strict liability, so the city could not argue that it was inequitable to allow a subrogation claim under the statute. See id. at 660-664.
One issue Maryland courts have not addressed, however, is whether a provision in the Local Government Tort Claims Act (“LGTCA”) that limits damages that may be recovered against local governmental entities to $200,000 per individual claim and $500,000 per occurrence applies to claims brought under the Riot Act. MD. CTS. & JUD. PROC. CODE ANN. § 5-303(a)(1) (2014). This statute was amended to include this limitation after the enactment of the Riot Act and after any Maryland court had applied the statute. Currently, Maryland statutes allow for subrogation claims to be brought against governmental entities that can potentially result in liability for damages caused in riots such as those occurring after the death of Freddie Gray. The damages for any such claims, however, may be capped by the limitations contained in the LGTCA.
While insured damages as a result of the riot may be recoverable, subrogation professionals should be mindful of the sensitivities that could accompany litigation arising out of the riot and should proceed with appropriate patience and consideration.