Q: Why must an insured accept or reject Terrorism Risk Insurance Act (TRIA) coverage under a commercial general liability or umbrella policy? Does the TRIA act provide any coverage that would fall under these policies?

Response 1: Each insurer specifies how they want the forms completed to comply with the law. If the customer doesn't reject it, many insurers will just add the coverage. Others don't provide an option and are only disclosing the allocated premium. 

The forms provide the opportunity to discuss the coverage issues with your customers. General liability covers a broad range of property damage and bodily injury claims. But, asking questions is the best route to take. If a terrorism event occurs, do they want coverage for the following allegations?

• An insured's employee was involved. 
• Components involved in the event were manufactured, assembled, stored or sold from the insured's location.
• The terrorism event occurs at the insured's location. Do they want premises liability coverage?
• Their building collapses, causing bodily injury and property damage to third parties.
• The insured failed to maintain security. For example, nursing homes, hotels, hospitals, malls, schools and other facility owner/operators usually have an obligation to provide reasonable levels of security for their residents and guests. 

Timing is also a concern. The terrorism exclusion is based on the motivation of the parties involved and how that matches up to the interpretation of federal officials. Investigation and review can take months to sort out. 

In Tennessee today, we are still waiting on a determination of terrorism status for the Christmas Day bombing. How long would your client want to wait before they find out if they have any insurance? 

Compare the above items to the premium and let them decide. If they make the decision with their eyes open, you have done your job. 

Response 2: Unlikely as it is your client may need it, anything is possible. A better answer is that insurance companies require it.

Response 3: Yes, the act provides bodily injury and property damage coverage.

Response 4: Think about the movie Die Hard and the amount of real and potential property damage and bodily injury. Do you think the building owner, business owner and security service might get sued?

There is no terrorism exclusion on most commercial general liability and umbrella policies, so they would have coverage. However, TRIA allows insurers to exclude coverage for certified terrorist acts if the insured is offered the opportunity for coverage and waives it.

Response 5: Yes, it would affect liability coverage under a variety of scenarios. The following is an example, as described in an AdvisorSmith article: 

You own a local amusement park, which is targeted in a terrorist attack. The terrorists set off a bomb inside your park, which causes multiple injuries to visitors of the park. Your business is sued by a customer who was injured, claiming you did not do enough to secure your facility. Under your general liability insurance, which includes coverage for acts of terrorism, you would be covered for any damages awarded to the customer if your company is found liable.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.