Low Says “No” to Terrorism Coverage Exclusions
By Michelle Logsdon - January 9, 2002California Insurance Commissioner Harry W. Low rejected, Jan. 8, proposed limitations and exclusions to coverage for acts of terrorism in commercial and homeowner insurance policies. The move curtailed attempts by insurers to diminish the liability nationwide.
The exclusion terms were outlined by Insurance Services Office, Inc. (ISO) and ratified by the National Association of Insurance Commissioners (NAIC).
Low disagreed with the terms because they were too broad and, in some cases, ill defined. In a prepared statement Low said, “There are a variety of concerns regarding an issue of this magnitude, ranging from limitations of coverage to definitions of terrorism.”
ISO introduced the guidelines for commercial insurance in November 2001 after Congress failed to pass legislation protecting insurers from future terrorist acts. ISO extended the guidelines to include homeowners insurance in December 2001.
Estimated insured losses from the Sept. 11 attacks have been reported as high as $70 billion. Christopher Guidette, a spokesperson for ISO, said insurers have been able to pay those claims so far but another incident of similar magnitude could financially cripple the industry without the help of the government or reinsurers.
Most major reinsurers dropped terrorism coverage when their contracts with insurers expired at the end of last year.
Under the guidelines, insurers would not have to pay terrorism-related claims if acts of terrorism occurring within 72 hours cause more than $25 million in damages nationwide or kill or injure more than 50 people. The damages threshold would not apply to acts of terrorism involving nuclear, chemical or biological materials.
Low’s specific concerns are that the damage threshold and the death or injury numbers are “unreasonably low,” and that the 72-hour period may be unfair. Plus, he would like to see more clarification on the effects on homeowners.
“The term terrorism has been broadly used to define everything ranging from vandalism to hate crimes,” said Low. “Our goal is to assure that policy language narrowly defines terrorism to eliminate any possible confusion between insurers and policyholders, especially in personal homeowners coverage.”
Forty-one states and territories have supported the proposed limits for commercial coverage. Two states have approved the homeowners exclusion as well. New York joined California in rejecting both.
Congress will review the subject of terrorism insurance limitations when it reconvenes later this month. If they pass federal legislation, states will not have to worry about passing their own.
| 
__May11th2017.gif)
.gif)