With the recent events in Boston on everyone’s mind, there’s probably a heightened awareness from most homeowners as to what kind of coverage might be available on the home insurance policy. Unfortunately, acts of what we commonly refer to as “terrorism” may not be easily defined when it comes to insurance policies. In fact, there’s not even a consistent approach across various types of insurance policies. For example, commercial insurance policies treat the situation differently than personal insurance policies, and they are all different from workers compensation insurance policies. What all this means is that you are right to be concerned and it bears further review of your home insurance policy.
The most common home insurance and the one that you should always seek is the “special” form, which is also known as an “all-risk” form. This means that the policy covers damage to your home from any peril (or cause) other than those that are specifically excluded. The opposite of this is a named peril policy, which only covers damage to your home by perils listed on the policy. As you can imagine, the latter is much more restrictive as you can’t likely guess at all the possible things that could cause damage.
However, when working with the all-risk form, you still need to be aware of the various excluded perils that can bar you from recovering under the home insurance policy. The most likely barrier to coverage for terrorism would be the exclusion for war-related actions that result in damage. What’s interesting about the war exclusion is that it generally defines war or warlike action as one being taken by a military force or military personnel. Frequently, terrorist activities are the result of individual civilians and can be difficult to trace back to a nation’s military.
The difficulty with defining terrorism has even greater implications on commercial policies. After the September 11, 2001, attacks, insurance companies began to clamp down on coverage in their policies for terrorist acts. With the concern for businesses and their ability to continue operating being called into question, Congress enacted the Terrorism Risk Insurance Act (TRIA) to provide the federal government’s support in the event of a terrorist act that results in significant losses. Unfortunately, TRIA’s definition of terrorism is still fairly narrow and requires a certification of an event by the Secretary of Treasury, the Secretary of State, and the Attorney General. Consequently, many activities that may be construed as terrorism may not meet the definition and will not be certified.
As an individual, there is also a significant amount of ambiguity on your home insurance policy. However, in many cases when it comes to insurance policies, ambiguity can be to your benefit as the courts have often come down on the side of the policyholder. The belief is that the insurance company knows better than to provide ambiguous wording in insurance policies. If there is something not clearly defined and the policyholder believes it to mean something different than the insurer believes, most courts will support the policyholder.
Even with that said you still need to be aware of the clear exclusions in your policy for terrorism-related activities. Anything that can be construed as warlike will definitely be excluded. There’s also an exclusion for anything arising out of nuclear activity, regardless of whether or not it was intentional on the part of the party causing it. However, in comparison to commercial policies that now contain a clear exclusion for terrorism and require policyholders to buy back the coverage, your home insurance policy likely still provides more benefit.