David L Ryan/Globe Staff
Back Bay businesses that collectively lost millions of dollars from the Marathon bombings are now counting on the Obama administration to declare that the single most devastating attack on Boston was not, legally speaking, an act of terrorism.
Illogical as that may seem, such a declaration might be the only way these businesses — many of which did not have specific coverage for terrorism — can get reimbursed for their losses by their insurance companies.
“A lot of businesses in the Back Bay will be greatly harmed if they do declare it terrorism,” said Chris Jamison, owner of Lolita Cocina & Tequila Bar near the corner of Dartmouth and Boylston streets. “I basically would have no plan whatsoever.”
The Marathon bombings are the first test of an insurance law Congress passed after the 9/11 attacks caused a record $32 billion in losses. The law requires that the government officially certify whether an act of terrorism has occurred in order to determine liability for losses. If a business did not buy specific terrorism coverage — as many small businesses on Boylston Street did not — an official designation could make it much harder to get reimbursed.
While the law is meant to provide clarity, it is failing to do so thus far in Boston, as it still could take many weeks, if not months, for federal officials to determine whether the bombings constitute terrorism, and longer still before it becomes known who will foot the bill for millions of dollars in losses.
“At this point, there are more questions than answers about all these matters,” said Jon Cowen, a lawyer and insurance specialist from Posternak, Blankstein & Lund whom the Menino administration has consulted on coverage issues. “The bottom line is that it’s doubtful we will know very soon whether this will be treated as terrorism.”
For President Obama, the matter presents a conundrum: He initially faced pressure to label the bombings terrorism to strengthen law enforcement powers, and he made that declaration before a national audience. Now his administration is being asked to state the opposite to save businesses along Boylston Street from a serious financial hit.
To determine whether the bombings constitute terrorism, the administration must work through a technical, multipart test, with the ultimate decision to be made jointly by the offices of the Treasury, the secretary of state, and the attorney general. The law does not set a deadline for making that determination.
The federal law is just one of several thickets businesses are negotiating on the insurance front. Most of their losses resulted from the closure of Boylston Street as a crime scene, not from the explosions themselves. Proving a loss thus becomes a complex and tedious matter of tallying old receipts from a prior comparable period and making the case to insurers that they accurately measures the cost of being forced by authorities to close.
Many commercial policies do pay for losses incurred as the result of such a closure. But specialists said that coverage has rarely, if ever, been invoked as a result of a large-scale act of violence in a major commercial district.
“Unfortunately, it comes down to a matter of policy language,” said Bill Granahan, a senior vice president for Marsh & McLennan New England, a division of the insurance giant. “And for small businesses, these are going to be difficult claims to file. They’ll have to get forensic accountants to review their receipts.”
As the process unfolds, the business owners and their employees are also working overtime to restock supplies, fix broken equipment, deal with vendors and contractors, and help employees with lost wages, traumatic memories, and, in some cases, serious injuries.
“I don’t think anybody is really back to normal yet,” said Dan Donahue, managing director of the Lenox Hotel. “For a lot of businesses, being closed down for more than a week is a catastrophic event. It’s going to be a long process to recover.”
Donahue said he is working with an accountant to tabulate losses that he expects will be in the hundreds of thousands of dollars. He said the hotel does have terrorism insurance. But since the federal government has not ruled on the designation, he does not know which provisions of his insurance will be relevant or how much the hotel will ultimately recoup.
“I think we’re going to be covered either way,” Donahue said. “But everybody is holding their cards very close to the vest right now. For the small businesses around us, you sort of hope it’s not determined to be terrorism.”
At Forum, a restaurant on Boylston Street where one of the bombs exploded, dealing with insurance is part of an extraordinarily long to-do list. The restaurant is undergoing a renovation, with an opening expected next month.
Meanwhile, the restaurant’s owners are still calculating their financial losses. A spokeswoman said the restaurant does not yet know how much will be covered.
Cost for terrorism coverage varies widely. For example, small to medium-sized businesses paid about $49 per $1 million of insured value in 2012, according to an analysis by Marsh. For small businesses then, such coverage ranges from a few hundred dollars a year, to several thousand — a price many deemed was too high given other expenses.
Now, those businesses are waiting on the Obama administration to learn where they stand with their insurance companies.
Jamison, the owner of Lolita Cocina & Tequila Bar, said his initial hope that the process would be straightforward disappeared quickly after he contacted his insurance carrier. He declined to provide a precise estimate, but said his losses are easily in the tens of thousands of dollars. Jamison said his insurance firm, which he declined to identity, has so far balked at covering his claim.
“It has not been a smooth, easy, or helpful process,” Jamison said. “Our doors are not going to close if we don’t get this settled, but this is real money. Your bills don’t just go away because you’re closed for nine days.”
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