Wm. Haycook
APRIL/2003 |
The Terrorism Risk Insurance Act of 2002 was signed into law and became effective February, 2003.
This Act has established a US government insurance program that shares the risk of losses from certain acts of international terrorism committed against people and property within the United States.
The Act is applicable to virtually all types of commercial insurance.
The Act is triggered when the US Treasury Secretary, in concurrence with the Secretary of State and the Attorney General, declares that an event meets the definition of an act of international terrorism as defined by the new law.
If such a declaration is issued, it will not be subject to judicial review.
Any declared event must cause losses of at least $5 million.
The Act requires every insurance company to offer
terrorism insurance coverage to all of their customers.
For workers compensation policies, the terrorism coverage is mandatory. If your group has a workers compensation policy, you will be notified at the time of renewal what the additional terrorism coverage charges will be.
On other types of policies the coverage must be offered, but you will be given the option of accepting or rejecting the terrorism coverage.
The cost of the terrorism coverage will vary depending on your state and depending on the type and extent of your existing insurance coverage.
Each time one of your insurance policies is scheduled to renew, you will be notified as to the additional terrorism coverage and what that coverage will cost. At the same time you will be given a form that you must sign indicating whether you want to purchase or reject the offered coverage.
Before you reject the offered coverage, please consider the following:
If you reject the offered terrorism coverage, an exclusion endorsement will be attached to your policy eliminating any kind of coverage for any act of terrorism.
If you reject the coverage and the US government declares that an event is an act of terrorism, the US government will not pay for any losses you may incur as a result of that event.
If you reject the coverage, your insurance will provide no coverage for any act of terrorism whether declared by the US government or not.
If you are in any of the states listed below, you can reject the offered terrorism coverage but you may not be able to deduct the entire cost of the coverage.
Arizona California Connecticut Georgia
Hawaii Idaho Ilinois Iowa
Louisiana Maine Massachusetts Michigan
Minnesota Missouri Nebraska New Hampshire
New Jersey New York North Carolina North Dakota
Oklahoma Oregon Pennsylvania Rhode Island
Texas Virginia Washington West Virginia
Wisconsin
All of these states have what are called ensuing fire statutes. These laws say that the insurance company must provide coverage if a fire ensues as a result of an act of terrorism.
If you reject the offered terrorism coverage, this will create an unusual situation. On the one hand, coverage for a declared act of terrorism will be excluded because you rejected the coverage. But the law in your sate says that if a fire ensues as a result of an act of terrorism, the insurance company must provide coverage for that ensuing loss.
Therefore, if you reject the offered terrorism coverage, the insurance company is going to retain a portion of the terrorism premium to pay for the ensuing fire loss coverage as mandated by the law in your state.
If this applies in your case, the information will be detailed within the documents sent to you at the time your policy is scheduled to renew.
By way of example, let's say your insurance is scheduled to renew at $1167.
The cost of the terrorism coverage is $67
You live in one of the listed states and you sign the form rejecting the terrorism coverage
Because your state has an ensuing fire statute, you can only deduct $53.
The remaining $14 will be retained by the insurance company in order to provide the ensuing fire coverage your state mandates.
It is our belief that, all things considered, our theatre customers should accept the offered coverage. While it is reasonable to assume that some areas of the country are more vulnerable then others, we believe it is naïve to assume that "it can't happen here". Homeland Security and other resources have made it abundantly clear that they think future terrorism attacks will likely be directed at less secure facilities such as transportation systems, schools, retail stores and non-government public buildings.
All insurance is about risk. Most insurance costs, however, are based, at least in part, on a careful analysis of such risks. Given the truly uncertain and unpredictable nature of any kind of future terrorism risk, we believe it is in your best interests to take the offered terrorism coverage.
All of this is very new to the insurance companies, to insurance agencies like ours and to insurance customers like you. Over time, a lot of the confusion and uncertainty will be worked out. However, what has been outlined here is based on what we know at this time. Clarifications and refinements will be passed along to AACT members as we receive such information.
© Copyright Ponta, Castle & Ingram Agency, Inc. All rights reserved.