Property Insurance and the Terrorist Exclusion
In the immediate aftermath of the recent shooting in San Bernardino, much of the focus, apart from concern for the victims and their families, was on understanding whether the violence was in fact an act of terrorism.
As employers and property owners in Canada increasingly turn their minds to the risks of terrorism in our own country, and consider how best to address their own potential liability, the same question could be vital in determining whether an insurance policy would respond in the event of losses from a terrorist event.
This is because following 9/11 many Canadian insurers introduced “terrorism exclusion” provisions in property and liability policies. Such provisions exclude coverage for loss or damage caused by “terrorism” or actions taken to respond to “terrorist” activity – terms that may be but are not necessarily defined in such policies.
For example, would the San Bernardino shooting, or that which occurred on Parliament Hill in October 2014, meet the following definition found in one commercial property policy?
“Terrorism” means an ideologically motivated unlawful act or acts, including but not limited to the use of violence or force or threat of violence or force, committed by or on behalf of any group(s), organization(s) or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public.
In both these cases, it seems likely. In such circumstances, owners with similar policies could find themselves without the benefit of coverage for property damage or third party liability (for example, for not providing adequate security).
To ensure coverage, some property owners have purchased specific terrorism policies, which are generally available in the Canadian market and are required by some lenders. But as incidents like those in Ottawa, Paris and San Bernardino continue to occur, some are concerned that insurers may become reluctant to underwrite such policies. Unlike the United States, France, and some other western countries, which introduced government-backed re-insurance schemes following 9/11, Canada has no such program in place currently.
damage Insurance liability property insurance terrorism terrorism exclusion third party