Terrorism Insurance

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On Sept. 11, 2011, I was in Hawaii when my daughter called me at 4 a.m. to tell me to turn on the TV and watch what was going on. I did just that and saw planes being flown by Islamofascists crash into the twin towers. I remember thinking at the time that this is an act of war and those losses won’t be covered by insurance.

Chubb Corporation

As it turns out, the buildings were insured by Chubb Corporation, one of the most reputable of insurers. Other insurers of the building included Swiss Reinsurance Company, Allianz AG, Ace Ltd. and XL Capital Ltd.

An act of war is not covered by insurance. Policies emphatically state that such losses are excluded from coverage. Chubb could have thrown out the old insurance industry dodge and turned the issue of whether or not the loss was covered, but they did not. When asked if Chubb would pay those claims, Chubb’s President John J. Degnan said, “Of course we will pay those claims. We are Chubb Insurance.”

It is not hard to understand why I regard Chubb Insurance as an exceptionally ethical insurance company. I know which companies fight and I know which companies pay fairly. I respect Chubb Insurance and Amica Insurance very much.

The lawyers rewarded Chubb by making an issue of whether or not there were two perils instead of one. Just as I was surprised that Chubb would pay the claim of the planes flown by Islamofascists, I was equally surprised that the lawyers would try to turn what I saw as one peril into two. Judges agreed with the plaintiffs against Chubb and that ruling eventually doubled the payout required of Chubb. Here is how it worked – Chubb agreed to pay one and got sued for the second.

The Invention of New Coverage

No one wants the question after a loss, “Is this an act of war and is it covered?” As a result of the events of Sept.11, insurance companies created a new coverage called terrorism insurance. You can actually purchase such insurance and the insurers get to collect more premium dollars. But, should you purchase terrorism insurance?

The Islamofascist problem isn’t going away any time soon. Terrorists with a $10,000 budget recently brought France to its knees. And, here in America, we continue to face ongoing threats of terrorism from various sources within and outside of our borders. It is for that reason I recommend everyone check the declarations of coverage in their policy and if they haven’t already purchased terrorism insurance, call their brokers immediately. Terrorism insurance doesn’t cost that much and it will become more and more valuable.

Consider the plight of the nightclub owners in Paris. Their buildings were shot up and their businesses are facing personal property damages in the carnage inflicted. I don’t understand the insurance industry in France. In the United States, however, this kind of damage could kill a business. Without terrorism insurance, the businesses won’t recoup any lost revenue through an appropriate business interruption policy.

We buy insurance to deal with catastrophes. Getting caught in the crossfire of mad killers is a catastrophe.

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