Adjusters wade through terrorism wordings

As the Ontario Insurance Adjusters Association (OIAA) met for its annual claims conference in Toronto recently, the implications of September 11 were still reverberating. With the introduction of new policy wordings and exclusions, adjusters are facing a far different task in understanding coverage than they were prior to the terrorist attacks in the U.S.

The scale of the losses for September 11 rival that of asbestos and environmental liabilities, says Mario Pietrangeli, partner at Hughes, Amys. The big difference, he adds, is that those exposures were spread out over years, rather than in one direct hit to the insurance industry. Key to the September 11 claims process has been insurers’ willingness to pay out claims and not attempt to invoke exclusions. The “war risk” exclusion in particular was not applied, both for public relations reasons, as insurers did not want to face public wrath for denying victims’ claims, but also because it likely would have failed a court test. Previous American cases have taken a narrow view of the exclusion and it would have been difficult for insurers to successfully use it, even if they had chosen to.

Pietrangeli notes that the exclusion wordings themselves are quite limited, and have been interpreted to apply only to acts of sovereign or quasi-sovereign states or entities.

He does note that war need not be expressly declared, however, and therefore any claims as a result of the current military undertaking in Afghanistan could fall under the exclusion. Future attacks will of course be subject to the new terrorism exclusions being developed by insurers and contemplated by regulators. The refusal of regulators in New York and California to allow exclusion wordings accepted by 43 other states throws the scenario into disarray, as these represent two of the largest insurance markets in the U.S.

Other session as the adjusters’ conference focussed on current issues including statutory accident benefits claims, mold hazards awareness and motor vehicle accident reconstruction techniques.