Terrorism Exclusion in Commercial Property Insurance – what does the “terrorist incident” declaration mean?
The following extract taken from a Business Pack insurance policy represents a common form of Terrorism exclusion in the Australian commercial property market whereby cover is excluded for
Any act(s) of terrorism
For the purpose of this exclusion an act of terrorism means an act, which may include but is not limited to an act involving the use of force or violence and/or threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s)or government(s), which from its nature or context is done for, or in connection with, political, religious, ideological, or ethnic or similar purposes or reasons, including the intention to influence any government and/or to put the public, or any section of the public, in fear.
The announcement by Treasurer Joe Hockey on Thursday 15th January that the siege by gunman Man Haron Monis of the Martin Place Lindt Café one month earlier amounted to a “terrorist incident” for the purposes of the Terrorism Insurance Act 2003, was a welcome statement. http://jbh.ministers.treasury.gov.au/media-release/001-2015/.
However, the declaration in and of itself, doesn’t mean that all those business affected by the sad events have full protection. What the announcement does mean is that Insurers cannot apply any terrorism related exclusion (such as the one listed above) in their insurance contracts to this incident.
For insurance cover to apply clients affected by the event must meet a number of criteria:
First and foremost the policy of insurance in which the exclusion applies must be an “eligible insurance contract” (the business pack quoted above would be such a contract) covering
a. Buildings, fixtures and other tangible property located therein } see the link
b. Business Interruption arising from (a.) above } for full
c. Liability arising from (a.) above } details
Secondly the insureds operative clause and other policy terms and conditions still apply, including the test for average, the deductible and/or waiting period and other more specific property and peril exclusions that might affect the claim.
Regrettably this means that a number of parties affected by the event, without coverage say for Business Interruption (by the application of policy deductible or exclusion), have no claim either against their insurer or the Government for loss of Gross Profits or Increased Cost of Working directly or indirectly arising out of the closure of the surrounding area and drop in sales during the critical Christmas trading period that followed.
Latest figures suggest that insured losses amount to less than $1,000,000 however it is likely that the absolute cost to affected parties is much higher.