In the aftermath of the Boston Marathon bombings, the government, the business community, and the people of Boston have come together to spread the economic cost of the tragedy as broadly as possible. Corporations, philanthropic leaders, and individuals have contributed more than $27 million to the One Fund for personal injury victims of the tragedy. Several health insurers have agreed not to charge the injured for the portion of health care costs not covered by their policies. And businesses in the Copley Square area that were forced to close because the police were investigating a crime scene have agreed to pay their employees’ wages that would otherwise have been lost.
One group that has yet to step up are the companies that provide insurance coverage for business interruption. That is, if a business is unable to operate, such as when law enforcement closes the area in which the business is located. Since the World Trade Center attack in 2001, policies providing coverage for business interruption generally contain an exclusion for losses arising from terrorist acts.
In some cases, the policies exclude acts of terrorism certified by the federal government under the Terrorism Risk Insurance Act, a statute enacted after 9/11. In other cases, the policies exclude “acts of terrorism” as defined in the policies. While businesses may purchase specific insurance to cover terrorist acts, it is unclear how many businesses in the Copley Square area have done so. I would suspect many, if not most, have not.
While it might be naive to expect public and private insurers to join the rest of Boston and “do the right thing,” there are at least two reasons insurers should err on the side not of invoking the terrorism exclusion for otherwise insurable business interruption losses suffered by Copley Square businesses.
First, exclusions in insurance policies, such as the terrorism exclusion in business interruption policies are, as a matter of law, to be construed narrowly. The federal government has not certified the Boston Marathon bombing as a terrorist act within the meaning of the Terrorism Risk Insurance Act, and it is not clear whether the bombing will satisfy the requirements for certification. So, there may be no basis for invoking the terrorism exclusion in certain business interruption policies. Insurers should provide coverage unless and until there is a certification.
And, as to those policies that require the perpetrators’ intent be to intimidate or coerce the government or the people, it is not yet clear what the Marathon bombers’ intent was here, particularly if the suspects acted alone and had no clear intent. What’s more, some exclusions apply only when biological, radioactive, or chemical weapons are used. Rather than face an onslaught of litigation from sympathetic businesses-owners who may have a good argument that the terrorism exclusion in a particular policy does not apply to them, insurers should err on the side of not invoking the exclusion.
Second, we are one Boston. The losses arising from the marathon tragedy have been psychologically borne by everyone in this community and beyond. Governmental and philanthropic leaders, and certain businesses and individuals in Boston, have already taken steps to ensure that some of the economic losses are shared as well. Business interruption insurers should join their lead.