What if you’re the victim of a mass shooting in a mall, a movie theater or even an ice cream shop? What if you own that business? What if a terrorist targets an area that also includes your home? Were the victims of the Boston Marathon bombing covered by the Boston Marathon? What kinds of calamities are covered by insurance, anyway?
Whether it’s homegrown or potential danger from abroad, many people are wondering the same thing. Is terrorism covered by insurance or not?
There’s no denying that the frequency of mass shootings has risen. In 2012, a shooter opened fire in a movie theater in Aurora, Colorado. After the survivors of the victims tried to sue the owner of the theater chain, Cinemark, a judge and jury absolved the company for liability in failing to stop the shooter. Despite the victory for the business owner’s insurance company, other insurers have started to reconsider their role in these types of calamities.
Situations like losses incurred from “acts of terrorism” are explicitly excluded in most homeowners insurance policies, but the verbiage in workers’ compensation insurance and commercial general liability insurance policies is vague at best and leaves some businesses exposed to losses.
In most workplace situations, worker injuries during any work-site incident are covered by workers’ compensation. Bodily injury and property damage are usually covered by commercial general liability (CGL) policies. Where does that leave business owners if there is a terrorist attack or shooting on their premises?
The fact is that most CGLs do not exclude mass shootings and other acts of terrorism. That means that a business’s insurer may or may not pay out these types of claims. For now, the laws governing insurance for these types of incidents are muddy, leaving business owners to chance for getting a claim paid.
Is There Such a Thing as Terrorism Coverage?
The Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) requires that insurers offer terrorism coverage with commercial lines of insurance. Some commercial general liability insurance policies allow business owners to add a terrorism endorsement. Often these endorsements explicitly address foreign or domestic acts of terrorism. To be covered, certification requires U.S. government officials to determine that the attack was an attempt at “coercing civilians or the U.S. government,” once again leaving most businesses in limbo in terms of coverage.
Basically, despite TRIPRA, insurers have the freedom to exclude terrorism from a standard policy during the underwriting process, even in a way that excludes coverage for any acts of violence. Many underwriters exclude terrorism from their policies, which does little to protect the insurer from paying out a claim, simply because rarely do acts of violence qualify as acts of terrorism according to the government’s definition. Case in point: none of the mass shootings, so far, has been defined as an act of terrorism.
There is no certainty about coverage unless the business buys a stand-alone terrorism policy that goes beyond TRIPRA. The reason why some businesses may want to consider buying this sort of insurance is that most of the mass shootings and even situations like the Boston bombing have suffered high numbers of casualties with very little property damage. This is why a simple umbrella policy wouldn’t cover a calamity of this type. A violent sort of catastrophic loss that involves carnage may only be fully covered with terrorism coverage.
Only stand-alone terrorism liability insurance covers claims the government will not define as terrorist acts (sound like an oxymoron?). These policies have the kinds of limits that would cover mass casualties. However, the problem with terrorism insurance is that it is vague on mass shootings, which are not as of yet defined as acts of terrorism.
What Is Active Shooter Insurance?
Active shooter insurance, also called active assailant insurance, is a type of policy that would protect a company from acts of violence that include mass casualties by a lone gunman. Usually, these mass-shooting insurance policies include risk assessment, prevention training, crisis management and coverage for funeral expenses.
Active shooter insurance may also cover damaged property and business interruption due to a violent incident. Unlike the usual business interruption component in most general liability policies, the business may be covered for interruption too, even when there is minimal or no property damage. The reasoning behind this is that the psychic impact of a violent event is just as valid a reason to pause business operations as extensive property damage.
Different variations of active shooter insurance cover different things. For instance, some policies cover both terrorist and apolitical attacks.
As tensions escalate around the world, we are all increasingly at greater risk of being the victims of terrorism or a mass shooting. While it may seem like overkill to buy insurance to protect one’s livelihood in case a tragedy does occur, we are living in a new world, which is riddled with risk from foreign and domestic acts of violence.
It’s always important to stay abreast of new insurance products so you can inform your clients about the many ways you can safeguard their business. We’re here to keep you updated on new products.