INSURANCE (GENERAL); TERRORISM; WORKERS' COMPENSATION;
TERRORISM; WORKERS' COMPENSATION;
November 17, 2003
TERRORISM EXCLUSION FOR WORKERS’ COMPENSATION
By: John Moran, Associate Analyst
You asked if Connecticut has a terrorism exclusion for workers’ compensation insurance policies and, if so, did the General Assembly take action on this during the last session.
There is no terrorism exclusion in Connecticut workers’ compensation law, i. e. all workers’ compensation (WC) policies must include coverage for on-the-job injuries resulting from a terrorist act. Also, the General Assembly took no action this past session regarding terrorism coverage under WC.
FEDERAL TERRORISM RISK INSURANCE ACT OF 2002
Since the September 11, 2001 terrorist attacks there has been much concern over whether the insurance industry would continue to provide various types of insurance for losses due to terrorism. In response to this, Congress enacted the Terrorism Risk Insurance Act of 2002. The act was intended to limit the liability insurance carriers are exposed to in the event of a major terrorist incident. The act provides a federal backstop for acts of terrorism resulting in at least $ 5 million in losses and certified by the U. S. Treasury secretary as an insured loss. The act primarily covers property and casualty insurance other than workers’ compensation. (Before the act became law, a number of owners of large New York City office buildings could not obtain property insurance that would cover acts of terrorism. )
The act provides this federal backup for foreign-sponsored terrorism. Since the September 11, 2001 attacks marked a turning point in the magnitude of foreign attacks, the legislation specifically addresses this type of liability.
The new federal law did not change or supersede Connecticut’s WC laws. It did void all terrorism exclusions in any policies for property or casualty insurance existing on November 26, 2002 (the date it was enacted). The act allows insurers to reinstate such terrorism exclusions if they obtain (1) written permission from the insured party to do so or (2) the insured party fails to pay the increased premium charged by the insurer for the terrorism coverage.
WORKERS COMPENSATION COVERAGE FOR TERRORISM IN CONNECTICUT
The state Insurance Department issued Bulletin PC-52 (http: //www. ct. gov/cid/lib/cid/bullpc52. pdf) explaining the impact of the federal law and procedures for compiling with it.
The department’s bulletin noted the new federal law did not preempt Connecticut law for WC insurance. “As the state’s workers’ compensation law does not have any exclusions for terrorism or war, neither insurers nor policyholders may use the (federal) act’s procedures to create such an exclusion,” the bulletin states.
“No insurance carrier in Connecticut has submitted a (terrorism) exclusion to us for approval,” said Tom Taggart, an Insurance Department examiner. “And if they did, it would be rejected. ”
But the bulletin also points out that certain provisions of the act do cover WC, including the requirement to separately state the estimated amount of the insurance premium being charged for coverage of terrorist acts, as defined by the act. Showing the terrorism portion of the coverage separately has led some to believe the new law required coverage that was not previously mandated, but it only changed how the charge is presented on the bill and the amount of the terrorism WC premium has greatly increased since the September 11 attacks.