State tells insurers to cover terrorism damage

The Missouri Department of Insurance has told insurers that with few exceptions, they cannot exclude terrorism-related damage from homeowner, automobile and other personal property policies they sell in the state.

Such an exclusion is allowed only if an insurer can show that providing the coverage would cause it to fail, the department said in a recent bulletin

No company to date has been able to justify the exclusion, department director Scott Lakin said Friday.

Cape Girardeau insurance agent Ken Myles said the ruling probably won't impact most homeowner and car insurance policies, which are relatively small. A homeowner's policy, for example, may have a $100,000 liability coverage.

But it will make it harder and more expensive to obtain commercial insurance coverage where insurance companies are purchasing reinsurance to protect their finances against catastrophic events, he said.

Since the Sept. 11 terrorist attacks, many reinsurers have adopted policies that won't cover terrorism damage, Myles said.

"Underwriters are notoriously cautious," he said.

47 exclusions

So far, insurers have filed notice with the insurance department of terrorism exclusions on 47 homeowner and related policies.

But 35 have been withdrawn, and the department has asked insurers to withdraw the other 12. Also withdrawn was a request from 12 insurers, all in one insurance group, to exclude terrorism-related damage from private passenger auto policies.

Laurel Adkisson, an American Family Insurance agent in Cape Girardeau, doubts the insurance department ruling will have any impact on most insurance policies.

Adkisson said the American Family Insurance policies don't exclude terrorist damage. From an insurance standpoint, Adkisson said there's greater risk of flood damage in Cape Girardeau than damage from terrorist attacks.

While Lakin said it has been difficult for insurers to buy insurance to cover their own losses since the Sept. 11 attacks, Missouri consumers also need protection.

"Particularly in the case of auto, home and health lines, it is very difficult to assert that insurers now face such an unpredictable and potentially expensive loss that they can drop such coverage from policies and leave Missourians totally unprotected," Lakin said.

Lakin said the agency has not yet addressed life and health insurance as it pertains to acts of terrorism, but expects the state's position to differ little from its stance on auto and homeowner plans.

Joe Annotti, a spokesman for the National Association of Independent Insurers based in suburban Chicago, said the Missouri approach was reasonable.

"It's pretty much standard operating procedure that most state insurance departments have taken," Annotti said Friday in a telephone interview. "It sounds like they are acting responsibly. They are allowing them an out if they can justify that there is a financial risk."

Brent Butler, a lobbyist for the Missouri Insurance Coalition, which represents about 100 insurers, said his only concern was how terrorism would be defined with regard to policies.

"Terrorism can be defined in many different ways," said Butler, who had yet to receive feedback from members about the department's policy. "We'll have to take a closer look at that."

Staff writer Mark Bliss contributed to this story.