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Is Your Business Prepared for Terrorism?
By Floyd Arthur
Is Your Business Prepared for Terrorism?
On December 2, 2015, two heavily armed perpetrators opened fire at a
Christmas
party for employees of the San Bernardino County Health
Department in San
Bernardino, California, killing 14 people and wounding 26. The
attack reignited fears
of global terrorism here in the United States, and brought the city
of San Bernardino
to a standstill as law enforcement officials scrambled to find the
people and the
motives behind the attacks.
Terrorism Insurance
The attacks also crippled the San Bernardino County Health Department, which faced
the nearly impossible task of maintaining normal operations with
almost 40 fewer
employees than it had on hand before.
To assist the beleaguered health department, Gov. Jerry Brown of
California declared
a state of emergency in San Bernardino County on December
18. The declaration
allowed the state to send in replacement employees until the
injured staffers return
to work and empowered the state Office of Emergency Services to
provide additional
assistance to the the county and the citizens who were impacted by the
event.
How Terrorism Can Impact Your Business
The tragedy in San Bernardino demonstrates all too well how a
single act of terrorism
can bring a business to its knees. Although terrorist attacks are,
fortunately, rare in
the United States, those that have occurred have had devastating
consequences -- not
just in terms of lives lost and people injured, but in the amount of
damage to
surrounding property. Following the Boston Marathon bombing in 2013,
for example,
Massachusetts’ largest insurers paid out over $1.9 million in property
damage claims.
The cost of the World Trade Center attacks in New York was $31.6
billion in property
damage alone.
Further, a terrorist attack can interrupt normal business
operations for many days or
weeks as law enforcement and federal investigators sift through
the site for clues. If,
as in San Bernardino, a large number of employees or key
personnel are injured in
the attack ,even lengthier interruptions can ensue.
How Terrorism Insurance May Help
In the wake of the September 11, 2001, terrorist attacks in New York,
Pennsylvania
and Washington D.C., Congress passed the Terrorism Risk Insurance
Act, which
created a federally-backed insurance program to assist businesses who sustained
property damage due to terrorism. The program, which was
reauthorized by the
Obama administration in 2015, establishes a dollar threshold above
which the federal
government shares a portion of the cost of payments made by insurers
to businesses
that suffer damages in a terrorist attack. The law also mandates that
all commercial
insurers offer the coverage to all businesses and certain other types
of commercial
enterprises they insure.
The TIRA, however, has some significant limitations. For example,
an attack must be
certified as an act of terrorism by the Secretary of the Treasury and
the Secretary of
Homeland Security before the federal government steps in.
According to the language
of the original law, this means that an attack, whether perpetrated by
foreign or
domestic agents, must be deemed:
“an act that is dangerous to human life, property, or infrastructure and
to have
resulted in damage within the U.S. (or outside the U.S. in the case of a
U.S.-flagged
vessel, aircraft or premises of a U.S. mission). It must be committed as
part of an
effort to coerce U.S. civilians or to influence either policy or conduct of
the U.S.
Government through coercion. “
Further, as of 2015, the aggregate amount of property damage claims
suffered by the
insurance industry due to an attack must be at least $100 million before
the
government will certify an attack as a terrorist act. That amount
increases by $20
million per calendar year to a maximum of $200 million in the
year 2020.
Do You Need Terrorism Insurance?
The limitations of the federally backed terrorism insurance
program apply primarily
to insurers: They determine who bears the cost -- the insurer or the
federal
government -- when an act of terrorism causes property damage
to a business or
results in bodily injury to its employees. Furthermore, damages
due to acts of
terrorism are specifically excluded from many property and casualty
policies, so a
business without this coverage could find itself in dire financial
circumstances in the
event of a terrorist attack.
If you are interested in learning more about the benefits of
terrorism insurance, talk
with one of our commercial insurance experts today. We will
help you design an
insurance program that addresses all of your risk in the most
comprehensive and
cost-effective way. Just call us at 516-292-3780 between 9 a.m. and 6
p.m. to schedule
an appointment, or request a free consultation online now.
Visit www.CarmooGroup.com