In the wake of the tragic bombing in Boston last week, agents may be asked questions about the statutory exclusion for terrorist acts
Up until last Monday, April 15th, the exclusion for terrorist acts in the standard Massachusetts fire insurance policy and terrorist insurance seemed more like an academic question than a likely scenario. For those insurance professionals that now may be asked questions with regards to terrorist act exclusions, it is important to highlight the fact, that since April 13, 2011, a new statutory exclusion has been included within the standard commercial Massachusetts fire insurance policy and its related coverages. That exclusion states in part that:
“…a commercial policy issued in compliance with this section [G.L. c. 175, §99] may exclude coverage for loss by fire or other perils insured against if the fire or other perils insured against were caused directly or indirectly by an act of terrorism; …” (Emphasis added).
On Tuesday, April 16, President Obama spoke to the nation about the deadly bombings which had occurred in Boston the day before. During that speech, he referred to the bombings as an “act of terrorism.” While most of the U.S. populace would probably agree with the President’s conclusion, for insurance purposes, however, the President is not the actual person who makes the official determination as to whether or not it is officially “an act of terrorism.”
Under the Massachusetts policy form, “an act of terrorism” is defined by reference to the Federal Terrorism Risk Insurance Act of 2002 (P.L. 107-297), as amended. And under this statute, it is not the President but, the Secretary of the Treasury who, with the concurrence of the Secretary of State and the U.S. Attorney General, make the final determination as to whether or not a terrorist act has occurred. As a result, until these officials determine whether or not the Boston Marathon bombing was an “act of terror”, the Massachusetts exclusion and the Federal Act will not apply.
Five statutory conditions must be found to apply before the Secretary of the Treasury, with the concurrence of the Secretary of State, and the U.S. Attorney General, can certify the losses or damages from the Marathon bombing were caused by an “act of terror”
In order for the Secretary of the Treasury, along with the concurrence of the Secretary of State and U.S. Attorney General to certify that the losses and damages from the Boston Marathon Bombing were caused by an “act of terror”, five statutory conditions must be found to apply. Each of the officials would have to determine that last week’s events meet all of the following criteria:
- It is considered an act of terrorism;
- It is violent or dangerous to human life, property, or infrastructure;
- It results in damage within the United States, or specified United States foreign missions or common carriers;
- It is committed by an individual or individuals, as part of an effort to coerce the US civilian population or to influence the policy or affect the conduct of the US government by coercion;
- It causes property and casualty losses exceeding $5 million in the aggregate.
If all of these conditions are agreed upon, then those appointed U.S. officials will certify the events as an “ act of terrorism” thereby triggering in Massachusetts the terrorist exclusion.
No certification of an “act of terror” has been made under the Federal statute as of yet
As of today, it seems clear that conditions 1, 2, and 3, do apply. The Federal act, itself, does not define “property and casualty losses”. While the actual property damage from the bombing may not exceed $5 million, the casualty loss provisions of the statute’s remedies includes “claims for property damage, personal injury, or death arising out of or relating to such act of terrorism.” Those claims obviously have exceeded the $5 million statutory minimum required for certification. As a result, it is almost certain that condition five will also apply.
The only question that remains, is if condition four applies. It is presently unclear whether or not the perpetrators of the bombing intended to coerce the populace, or to influence and affect the conduct of the United States government by coercion. The answer to the question is presently unknown, and the political objectives of the bombers presently seem vague at best. The questioning of the surviving bomber may result in a clearer picture that will allow the Secretary of the Treasury to decide whether to declare the bombing an “act of terror”.
In any event, it is clear that as of yet no certification of the Marathon bombing as an “act of terror” has been issued by the Treasury Department and that until such time as certification is issued, the statutory terrorist exclusion in the standard commercial fire policy does not apply.