New Federal Law Helps Owners Get Terrorism Insurance

January 1, 2003

Since the events of Sept. 11, 2001, terrorism insurance has been a major issue for owners. That's because several insurers have written exclusions into their commercial liability and property insurance policies that would make acts of terrorism noncovered events. And those insurers that offer terrorism insurance have raised premiums to a level that makes it all but impossible for many owners to afford the coverage. Yet some high profile owners, such as the Mall of America, were forced by their lenders to get terrorism insurance regardless of the cost.

Since the events of Sept. 11, 2001, terrorism insurance has been a major issue for owners. That's because several insurers have written exclusions into their commercial liability and property insurance policies that would make acts of terrorism noncovered events. And those insurers that offer terrorism insurance have raised premiums to a level that makes it all but impossible for many owners to afford the coverage. Yet some high profile owners, such as the Mall of America, were forced by their lenders to get terrorism insurance regardless of the cost.

But a new federal law called the Terrorism Risk Insurance Act, which went into effect on Nov. 26, 2002, will help ensure that owners have access to adequate levels of terrorism insurance at affordable rates and with reasonable terms. Backed by the International Council of Shopping Centers and the Building Owners and Managers Association, the terrorism insurance program the new law creates will be in place for at least three years.

New Law Offers Several Protections

The new law provides you with the following key protections:

  • Requiring all insurers for the next two years to offer coverage for acts of terrorism—for an additional premium—in their property and liability insurance policies within 90 days of Nov. 26, 2002. That means if you want to pay for insurance coverage against acts of terrorism at your center, your insurer must give you the coverage;

  • Voiding any existing terrorism exclusion found in commercial property, general liability, workers' compensation, and other types of insurance coverage as of Nov. 26, 2002. That means if your current insurance policy explicitly excludes damage or loss caused by an act of terrorism, the insurer can't use that exclusion to deny a claim by you. But if, as described above, your insurer offers you coverage for acts of terrorism and you decide you don't want it, your insurer can then attach a terrorism exclusion to your policy;

  • Guaranteeing that federal funds of up to $100 billion will be available to pay 90 percent of an insurer's terrorism-related losses once these losses exceed specified levels for qualifying acts of terrorism. This is called “gap” insurance and serves to guarantee you payment—even in the event of a catastrophic loss that threatens to wipe out the insurer;

  • Preventing someone injured by an act of terrorism from collecting from you punitive damages—that is, damages meant to penalize a wrongdoer—unless the injured person can prove that you knowingly participated in, conspired in, aided and abetted, or committed an act of terrorism; and

  • Protecting you from facing multiple lawsuits for the same event in several jurisdictions by consolidating all civil lawsuits stemming from a terrorist attack in a single federal court for trial under the laws of the state in which the attack took place.

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