Marathon Monday’s tragic event in Boston is bringing up the need to review the need and coverage of the Certified Acts of Terrorism.  Commonly referred to as TRIA, this is a federal program much like the National Flood Insurance Program, but paid for by the insurance companies through assessments (premium charges).  It provides up to $100 billion in a program year and applies to losses within the US only.   This was set up as a response to lack of coverage stemming from the 9/11 attacks.  The insurance companies began excluding “Terrorist” acts and the government stepped in to set up a program to make the coverage available.  The insurance companies participate in the program and are assessment both premium and subject to a deductible in the event this coverage is triggered.

Below is from a package policy containing the definition:

“Certified act of terrorism” means an 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 pursuant to the federal Terrorism Risk Insurance Act.  The criteria contained in the Terrorism Risk Insurance Act for a “certified act of terrorism” include the following:

  1. The act resulted in insured losses in excess of $5 million in the aggregate, attributable to all types of insurance subject to the Terrorism Risk Insurance Act; and
  2. The act is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce the civilian population of the United State or to influence the policy or affect the conduct of the United State Government by coercion.

Certain coverage such as professional liability, personal lines, crop, health and life, and flood are not eligible under TRIA.  Other lines of coverage provide an option to include or exclude the coverage.

Many insurance companies, Travelers/Hartford, provide the coverage automatically.  Arbella requires a buy-in.  The insured’s receive the offer with their policy and they must elect the coverage.  Insured’s must opt in or out within a specific time of the effective date, for some companies the insured must elect/reject the coverage prior to binding.

Massachusetts is a “Standard Fire Policy” state, meaning insurance companies must provide coverage for direct losses from fire even if the original trigger was a terrorist act.

Keep in mind that TRIA does not provide coverage when terrorism involves Nuclear, Biological, or Chemical materials (commonly referred to as the NBC exclusion).  However under the 2007 revision, this can be optional.

Also remember that some policies have a “Civil Authority” exclusion – meaning, if a civil authority closes down the street and no one can shop at the client’s store, there is most likely no coverage.  However this varies from company to company so the policy form must be consulted.