Massachusetts Considers Bill to Exclude Terrorism From Fire Policy

Legislation being considered in Massachusetts would exclude terrorism coverage from the commonwealth's standard commercial fire policy.

Source: Source: Bestweek Wire Services | Published on October 19, 2009

The bill would allow policyholders the option of purchasing commercial property insurance with or without terrorism coverage. Under the federal Terrorism Risk Insurance Act, carriers are required to make terrorism coverage available, but policyholders are allowed to reject it.

The American Insurance Association (AIA) testified in support of H.B. 960 before the Joint Committee on Financial Services. AIA Northeast Region Vice President John Murphy said businesses should have the option of choosing coverage appropriate to them.

"Current law is inconsistent with federal law and impairs the ability of policyholders to manage their terrorism exposures or pursue innovative risk management solutions," he said in a statement.

Fourteen of 28 states that have laws on provisions of standard fire policy have amended their statutes since 2002 in order to exclude acts of terrorism, according to AIA; Idaho and New Jersey did so in 2008.

Leaders of the joint committee did not immediately return messages seeking comment.

A 2006 Government Accountability Office report cited an unnamed "national security expert" who speculated that, in the event of a nuclear detonation, policyholders and insurers in such "fire following" states could find themselves litigating whether damage was caused by a nuclear blast or the fire that followed it (BestWire, Oct. 16, 2006).