Insurance industry may be exempt from claims payouts
The Boston Marathon Bombings continue to send ripples throughout the insurance industry as more details concerning the disaster come to light. Last week, President Obama declared that last week’s bombings were, in fact, an “act of terror” perpetrated by a malicious party. The federal government has been pressured to avoid the term “terrorism,” however, due to the implications that could have within the insurance industry. Classifying the disaster as terrorism could potentially exempt insurance companies from providing benefits to policyholders.
Bombings may be classified as act of terrorism
The bombings caused significant damage to properties along the Boston Marathon track, as well as significant injuries to the crowds that had been caught in the blasts. As with any disaster, the insurance industry was quick to mobilize, working with those affected by the bombings in order to ensure that claims were filed in a quick and effective manner. The insurance industry had expected to issue payouts for claims in short order, but when the federal government began referring to the disaster as an act of terror, many insurers began to halt their processing of claims.
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Lack of terrorism insurance means insurance industry may get a pass
Terrorism insurance is a very real form of coverage, but is not common within the U.S., especially in cities like Boston. Properties that are typically covered by terrorism insurance policies usually see a great deal of international traffic, such as airports or the New York Stock Exchange. Small businesses, such as those most affected in the bombings, do not typically protect themselves from acts of terror due to the fact that such attacks are exceedingly uncommon within the U.S. Terrorism insurance is considered a thriving market in other parts of the world.
Insurers may be forced to honor claims associated with the disaster
If the Boston Marathons are classified as terrorism, which is likely, the insurance company will not be liable for payouts concerning the claims generated by the event. This is due to the simple fact that the properties affected by the attack, as well as the victims of the bombings, are not protected against terrorism attacks by their insurance policies. According to federal regulations, however, the insurance industry is required to issue payouts on property insurance policies where more than $5 million in damage was caused due to acts of terror. Moreover, state and federal lawmakers may move to force insurers to honor claims due to the severity and sensitive nature of the disaster.