Terrorist Acts and Insurance

* The dead had yet to be removed from the remains of the federal building in Oklahoma City and the insurance industry was already talking about eliminating coverage for losses caused by terrorist acts committed in the United States.

We in California have recently learned that insurers don’t want to cover earthquakes. Only the federal government provides flood insurance, since insurers were willing to write coverage only for areas that hardly ever flooded. Insurers have also refused to provide fire insurance in certain areas in California. After the riots in Los Angeles in 1992, insurance was unavailable to many business owners in certain parts of the city. Floridians and Hawaiians have found it hard to secure homeowners coverage due to the hurricane threat and found out firsthand how such disasters can be used for profit. For example, the day Hurricane Andrew hit Florida, an executive of one large insurer sent out a memo to his regional directors saying, “This storm will cause extensive damage in southern Florida. This is an opportunity to get price increases now.”

So, after terrorism exclusions, what’s next? Excluding claims payment for losses caused by arson or vandalism? Would future victims of fires similar to Altadena, Laguna and Malibu find themselves without compensation, depending on whether the fire was sparked by lightning or a lit match? Of course, why stop here? What about theft, vandalism and dog bites?

Insurance companies should not be allowed to use this senseless, terrible act as an excuse for a financial assault on consumers in the form of price increases or for limiting their liability in such cases. Insurance regulators must protect the public interest and refuse to allow changes such as these to underwriting guidelines.

PHILIP ROBERTO

Prop. 103 Enforcement Project

Los Angeles