Calif. Won’t Adopt Terror Exclusions

January 8, 2002

According to a Jan. 7 Los Angeles Times article, California has refused to allow insurers to adopt terrorism exclusion language, a move which has already been by approximately 20 other states in the wake of Sept. 11.

The Times quoted California Department of Insurance Deputy Commissioner Scott Edelen as stating that such terrorism exclusion language runs the risk of being too broadly interpreted and could possibly permit insurers to disallow coverage for hate crimes.

A number of states began to adopt terrorism exclusion language after Congress failed to pass Federal Reinsurance Terrorism legislation in 2001.

The National Association of Independent Insurers has released the following list of actions taken by the states with regard to exclusion language (IJ has omitted California due recent development reported above):

TERRORISM STATEMENTS

STATE

FORMAT

COMMENTS

Alabama

DOI Bulletin

Advises all insurers and licensees to become familiar with the obligation under the President’s Executive Order regarding financial assets of known terrorists.

Alaska

NAII Staff

12/28 The Alaska DOI is about to issue a bulletin on terrorism exclusion. Director Lohr had a great deal of input at NAIC in making their position and we assume Alaska will follow NAIC recommendations. We expect exclusions to be allowed until Congress takes action. Sara McNair Grove is the Division lead on the subject.

Arizona

DOI Regulatory Bulletin 2001-15

NAII Staff

10/16 Advises all insurers and licensees to become familiar with the obligation under the President’s Executive Order regarding financial assets of known terrorists.
1/02/02 The Arizona Insurance Department has approved the ISO terrorism exclusion for commercial lines policies.

Arkansas

NAII Local Counsel

1/3/02 In Arkansas, Bill Lacy, Director of the P & C Division has confirmed that no exclusion will be allowed on personal lines policies and commercial lines policies must use an exclusion similar to that drafted by ISO.

Colorado

DOI Advisory

BestWire

Advises all insurers and licensees to become familiar with the obligation under the President’s Executive Order regarding financial assets of known terrorists.
12/18 Allows insurers to exclude terrorism coverage, according to ISO

Connecticut

12/17 The CT DOI is not approving terrorism exclusions until Congress makes a decision.

Delaware

Dist. of Columbia

Florida

DOI Bulletin

10/11 Special bulletin to insurance companies and agents outlining their responsibilities to assist in the country’s response to the terrorist attacks in New York and Washington.

Georgia

Hawaii

NAII Staff

1/2/02 The Hawaii Insurance Department has approved the ISO terrorism exclusion for commercial lines policies.

Idaho

BestWire

12/18 Allows insurers to exclude terrorism coverage, according to ISO

Illinois

DOI Advisory, Bulletin

IL Bulletin 2001-11

Advises all insurers and licensees to become familiar with the obligation under the President’s Executive Order regarding financial assets of known terrorists.DOI Bulletin RE NAIC SSAP No. 62 “9-Month Rule” – For contracts whose completion was delayed by 9/11, a 3-month extension has been granted.
12/31/02 The Illinois Department will accept limited exclusions for acts of terrorism for commercial lines. This Bulletin expires 3/1/02.

Indiana

Iowa

DOI Advisory

Advises all insurers and licensees to become familiar with the obligation under the President’s Executive Order regarding financial assets of known terrorists.

Kansas

DOI Bulletin

10/19 Cautions insurers to be aware of their obligations under President Bush’s Executive Order blocking property of anyone/entity dealing with persons/entities on a federal list. Nothing yet dealing with terrorism exclusions.

Kentucky

NAII Local Counsel

1/3/02 The Kentucky Department will not be doing anything “formally” on this topic. They may look at exclusions on a company-by-company basis, but they have no intention of issuing a regulation or a bulletin.

Louisiana

DOI Bulletin

12/21/01 The Louisiana Department of Insurance will conditionally approve filings with terrorism exclusions. The Insurance Services Office (ISO) has filed and the Louisiana Department of Insurance has given conditional approval to the ISO forms which may be used by insurers immediately.

Maine

Maryland

NAII Staff

1/2/02 DOI will be putting out a Bulletin shortly. The Department has approved the ISO commercial exclusion. The Department will approve any non-ISO commercial form if it has an identical exclusion. The Department has taken no position yet on personal lines forms, is awaiting the outcome of NAIC discussions on this but may be unlikely to approve personal lines forms exclusions.

Massachusetts

DOI Notice, Bulletin

BestWire

DOI put an item on their Web site regarding life insurance.
12/3, DOI issues bulletin containing minimum requirements for terrorism exclusion endorsements to be submitted for approval in MA. Also approved several commercial lines terrorism exclusion endorsements and related rules filed recently by ISO.
12/18 Allows insurers to exclude terrorism coverage, according to ISO

Michigan

DOI Notice

12/4 DOI put out terrorism data call.

Minnesota

Statement by Commerce Commissioner

Agrees with Congress that the war exclusions do not apply since the attacks of 9/11 are not acts of war in the legal sense because no government or recognized authority was involved. They note that the p/c industry has said they will not use the war exclusion in regard to 9/11 cases. Commissioner states if an insurer invokes war exclusion, he will use every resource available to the Dept. to make sure the company fulfills its “contractual, moral, and patriotic obligation.”
12/26 The Department will now accept the ISO commercial lines filing with the terrorism exclusion. However, the Department may want to negotiate the $25 mm threshold. The Department will not accept terrorism exclusions for personal lines and group life unless the insurer can produce a reinsurance treaty which has a terrorism exclusion. At that time, the Department will consider those personal lines and group life exclusions on a case-by-case basis.

Mississippi

Missouri

DOI Survey, Press Release

10/4 The MO DOI is conducting a “voluntary” survey of companies to gather information about war and terrorism exclusions.
11/30 DOI put out release regarding need for federal limits on terrorism coverage.

Montana

NAII Staff

1/2/02 The Montana Department has approved the ISO commercial exclusion. It will approve any non-ISO commercial filing that contains an exclusion that is substantially similar to the ISO exclusion. A filing that is more generous to the insured than the ISO exclusion may also be approved, but must be accompanied by the filer’s reinsurance agreement. The Department has not taken a position on personal lines exclusions, and a few such filings at the Department “are in limbo”.

Nebraska

DOI Bulletin

10/26, Directs insurers to become familiar with President Bush’s Executive order.

Nevada

NAII Staff

1/2/02 The Nevada Insurance Department has approved the ISO terrorism exclusion for commercial lines policies.

New Hampshire

New Jersey

DOI Bulletin

NAII Staff

9/25 Advises insurers to become familiar with their obligations under the Executive Order.
1/2/02 The Department will put out a Bulletin shortly. It has approved the ISO commercial exclusion. It will approve any “similar” commercial lines exclusion so long as it mirrors the NAIC standards negotiated with ISO.

New Mexico

NAII Staff

1/3/02 Approved the ISO terrorism exclusion filing on December 18. The ISO filing should be available late this week. Individual company filings will be reviewed and approved if possible. No DOI communications will be issued at this time.

New York

SB 5798

DOI Advisory

This bill makes it illegal for any insurance company to exclude acts of terrorism in any policy.Advises all insurers and licensees to become familiar with obligation under the President’s Executive Order regarding financial assets of known terrorists.

North Carolina

Legislation HB 1468

12/3 Passed criminal bill regarding bioterrorism – tough new penalties for anyone involved in chemical or biological weapons attacks.

Ohio

NAII Local Counsel

1/3/02 The Ohio Department has not “commenced any activity on the issue of terrorism exclusions”.

Oklahoma

NAII Staff

1/3/02 Approved ISO commercial filing December 27 or 28. Personal lines filing is under review this week. Oklahoma is following the NAIC format. Individual company filings are requested to use ISO verbiage.

Oregon

Pennsylvania

Rhode Island

South Carolina

NAII Staff

1/3/02 South Carolina is approving terrorist exclusions and have specifically approved the ISO forms. There has been no written bulletin from the DOI of this however and they do not plan on sending one out.

South Dakota

Wall Street Journal

12/14 South Dakota has become the first state to approve broad terrorism exclusions in commercial insurance policies. Regulators in other states say that they will adopt similar rules unless Congress takes action to protect insurers from exposure to huge damage claims from acts of terrorism. The actions by state regulators will apply primarily to small and midsize businesses. State regulations do not generally apply to larger commercial insurance policies but most of the insurers that provide coverage for large companies have already taken action to put terrorism exclusions into effect.

Tennessee

Texas

NAII Staff

1/3/02 Began the reviewing process on the ISO filing December 28. Staff will meet on January 3rd to make approval decisions. Notices will be posted to TDI website.

Utah

Vermont

Virginia

Administrative Letter

VA Bureau of Insurance

VA State Corporation Commission Bureau of Insurance issued an administrative letter outlining expectation of insurers’ actions in response to claims arising from 9/11 attack.
12/27/01 A document was mailed to all licensed P&C companies to advise them of the approval of ISO’s terrorism exclusion endorsements for certain commercial lines policies. These endorsements havebeen approved for use by ISO’s member companies effective January 1, 2002. In an agreement reached with the various states through the NAIC, ISO hasagreed to license the use of these endorsements, without charge, to non-affiliated insurers.

Washington

IDC Bulletin

Insurance Commissioner

10/27 Disallowed terrorism exclusion; effective 12/31/01.
12/26 Given Congress’ failure to enact terrorism reinsurance legislation prior to adjourning this year, the Washington Office of the Insurance Commissioner will be approving commercial polices that use the ISO partial exclusion for terrorism claims. The announcement on the OIC web site is incorporated below, as are ISO forms. Companies that have not contracted with ISO to use their forms will be able to use them after executing a limited license agreement that does not include a licensing fee. The exclusion applies to commercial losses in excess of $25,000,000. It also reads, in part: “When the Terrorism Exclusion applies to an incident of terrorism, there is no coverage under this Coverage Part or Standard Fire Policy.” The OIC still considers these approvals to be temporary, as they hope Congress will act upon reconvening in 2002.

West Virginia

Wisconsin

NAII Staff

1/2/02 The Department has approved the ISO commercial exclusion and will approve any other non-ISO commercial filing that has a substantially similar exclusion. As a general standard, it is not approving any personal lines exclusion, but it may do so on a case-by-case basis if adequate justification is given.

Wyoming

From Local Counsel

12/28 WDOI is not approving any “terrorism” exclusions. Will hold for 90 days under their regs. Hoping for federal, legislation.

H:LemanTerrorismState Chart

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