Terrorism coverage and small business GL

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Rob
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Terrorism coverage and small business GL

Post by Rob »

Many of the accounts I write are the type of businesses that are not acceptable in the standard market so they end up being written on a surplus lines basis. Nearly all of the quotes for General Liability contain an offer of terrorism coverage per the Federal law. When my customers ask if they need this, I'm hard pressed to find an example of why a small busines (like a small remodeling contractor) would need terrorism coverage on a GL policy since the GL policy will respond for damages for which he is legally liable. Does anyone recommend to their customers that they purchase this coverage and if so, why? (specifically.....because I can't think of one example). Thanks.
Shagster12
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Re: Terrorism coverage and small business GL

Post by Shagster12 »

Rob,
I have to agree it's very difficult to provide an insured a convincing argument for the need of TRIA.
I usually tell them "it's an optional coverage (usually, though some carriers do not offer an opt out) that we are mandated to offer. That said, if you're not in an area you might consider 'at risk' or 'high risk' as a possible target, such as airports, large commercial centers, financial centers, governmentals centers... then the need is probably very minimal. However if you're in an area that is close to a ground zero radius of one of the aforementioned possible targets than you should at least give it serious consideration...
Anyway that's my 2 cents worth...
Shagster
wlunday
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Re: Terrorism coverage and small business GL

Post by wlunday »

While I can (sort of) understand the need to cover extra bases for a property related policy, the question had to do with GL. I can not think of a scenerio where the GL would ever come into play... unless your business employed a terrorist? And, said terrorist did something icky while under your employ? Who knows. I think the GL would exclude intentional acts anyway!

Anybody else have any ideas as to why a GL would need the terrorism coverage?

Swymmer
rcenters
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Re: Terrorism coverage and small business GL

Post by rcenters »

Just a thought, but if your business stocks materials(even if it is a small gas can!) that can be used to make part of explosives and it's found out that it was stolen from you, could not a small business be sued for failure to secure it?


Or, yes, maybe you employed a terror suspect and they used your employment to gain access to a building?
jinman
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Re: Terrorism coverage and small business GL

Post by jinman »

What about some kind of prem ops exposure? Visitors to the business?
bjorgens
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Re: Terrorism coverage and small business GL

Post by bjorgens »

A potential example may be World Trade Center, Tower Two. Workers were told it was safe to continue to work in this building after Tower One had been hit. Some may allege that the direction given was negligent and that had people been instructed to immediately begin evacuating fewer people might have lost their lives.
InsMgmt
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Re: Terrorism coverage and small business GL

Post by InsMgmt »

Insurers and re-insurers view the terrorism loss potential as a very real risk across all the lines currently covered by the Federal safety net provided by TRIA. For example, a terrorist attack on a college or professional sports stadium would not only result in substantial physical damage, but could also create liability losses that equal or exceed the property losses due to deaths or serious injury.

If the Fed was to exclude GL, and the backstop the TRIA would provide, then we would begin to see rate increases and/or diminished capacity as carriers began assess the potential for losses. For example, let's say that the capacity of the property insurance industry and the reinsurance industry, stand at $600 billion currently. That $600 billion has to support all kinds of insurance, from homeowners to personal auto to property insurance on skyscrapers. If you have a terrorism claim that's $200 billion, you impair the industry to write workmen's comp and homeowners and general liability.

This being the case, carriers have lobbied Congress to continue to include GL and Umbrella Liability as lines covered by the program, and, as such, carriers are required to offer coverage to policyholders for all lines covered by the program. Whether or not your client elects to pay the additional premium for coverage under their GL policy will depend, in part, on your assessment of their exposure to claims following a certified act of terrorism.
St.CaptiveGuy
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Re: Terrorism coverage and small business GL

Post by St.CaptiveGuy »

Good point, InsMgmt. But what is a "certified act of terrorism" and has the US ever had one since TRIA's incpetion?

TRIA offers "coverage for losses resulting from acts of terrorism, as defined in Section 102(1) of the Act: The term “act of terrorism” means any act that is certified by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the United States, to be an act of terrorism; to be a violent act or an act that is dangerous to human life, property, or infrastructure; to have resulted in damage within the United States, or outside the United States in the case of certain air carriers or vessels or the premises of a United States mission; and to have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion." Very specific.

Interestingly, a coverable TRIA event has to be "certified" by both the Secretary of the Treasury, the Secretary of State AND the US Attorney General. So now the coverage has a political aspect. Didn't the President specifically push the insurance industry not to use the definition of "act of terrorism" as a way to get out of paying claims related to 9/11?

Due to this definition of covered acts, TRIA is limited compared with the perception of coverage it offers. To illustrate the point, I was concerned about this issue a couple years ago and so I talked to a General Agent that works on large risks with inherently high risk for terrorist attacks like the Golden Gate bridge or Pac Bell Park: these risks don't rely on TRIA, they go to the high cap markets (Lloyds, Zurich, ACE, AIG, etc...) and get formal Terrorism coverage.

Bottom line, if you have a real terrorism exposure, you'll want to look at a real terrorism policy or risk a gap in coverage.
rcenters
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Re: Terrorism coverage and small business GL

Post by rcenters »

"If the Fed was to exclude GL, and the backstop the TRIA would provide, then we would begin to see rate increases and/or diminished capacity..."

My understanding is that after 9/11 the insurance industry was about to exclude terrorism losses overall but that the feds moved to both prohibit them from doing so and backstop the losses at the same time. Assuming that's correct, would the Feds really cease backstopping TRIA but still prohibit terrorism exclusions?
DarrenR
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Re: Terrorism coverage and small business GL

Post by DarrenR »

St.CaptiveGuy wrote:Didn't the President specifically push the insurance industry not to use the definition of "act of terrorism" as a way to get out of paying claims related to 9/11?
I believe the President pushed to not have the 9/11 attacks declared acts of war so that insurance policies would pay claims.
LadyBroker
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Re: Terrorism coverage and small business GL

Post by LadyBroker »

Go back and read your policies issued prior to 9/11. I think you'll find that most had no Terrorism exclusion, because we as a country never believed it would happen to us. Also, read the definition of War, and you'll see that Terrorism and War are mutually exclusive.

I do agree with the poster who states that large risks with real exposure purchase coverage in the excess market. If you have a risk that has a large exposure on the Property side, work comp side or Liability side, I would definitely seek a stand alone policy, as the TRIA act has a cap per event.
"It's a typical day, on the road to Utopia.."
gregcw
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Re: Terrorism coverage and small business GL

Post by gregcw »

wlunday wrote:While I can (sort of) understand the need to cover extra bases for a property related policy, the question had to do with GL. I can not think of a scenerio where the GL would ever come into play... unless your business employed a terrorist? And, said terrorist did something icky while under your employ? Who knows. I think the GL would exclude intentional acts anyway!
Anybody else have any ideas as to why a GL would need the terrorism coverage?
Swymmer
The GL would exclude YOUR intentional acts. Not those of your employee.
Gregcw
LadyBroker
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Re: Terrorism coverage and small business GL

Post by LadyBroker »

I can't be certain, but I don't believe the Congress had a way to declare 9/11 an Act of War, because it was not perpetrated by a Foreign Government.
"It's a typical day, on the road to Utopia.."
railroadgirl
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Re: Terrorism coverage and small business GL

Post by railroadgirl »

There are some states that require terrorism coverage for the GL/PROP/AUTO. Most of my carriers indicated that the coverage is optional. However I have one carrier that has informed me that in some states it's not an optional coverage. In those states they cannot issue a premium charge since it is mandatory. Does anyone have any ideas what these states are? My underwriter doesn't know either. It came up when I got the policy and tried to delete the coverage. First I heard of it. Any help would be great.

Thanks.
RussARS
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Re: Terrorism coverage and small business GL

Post by RussARS »

Hi everyone,

Looks like I am a little late to the party. Anyway I spent the last month or so locking into standalone terrorism insurance and have uncovered some very mind blowing fact

1. TRIA has NEVER paid a claim in the history of the program (not Boston bombing, Not Orlando, Not San Bernadino, NOTHING)

2. Reason being is the act needs to be "Certified" by the government AND the loss has to be in excess of $ 5,000,000

3. According to the guardian (newspaper), TRIA has collected over 40 Billion in premiums and it only cost approx 1mm per year to administer the program

I am a wholesaler with over 23 years experience in the business and can help if you have any clients looking for a standalone terrorism solution. Either to replace TRIA or buy the coverage outright. There are several carriers that write it however each carrier has certain terms that the others don't. For example "Threat", Terrorism GL, Coverage for Nuclear/Chemical

If anyone is interested in chatting more let me know
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