A U.S. Treasury Department spokesperson last week provided a statement to Boston news outlets that said “The Secretary has not determined that there has been an ‘act of terrorism’ under the Terrorism Risk Insurance Act” for the April 15, 2013, Boston Marathon bombing.
A Treasury spokesperson confirmed to Ãå±±ÂÖ¼é that the department provided the statement to the local media but declined to provide additional comments.
The Treasury has been providing identical or similar statements since April 2013. Industry participants say this latest statement from the Treasury appears to be a continuation of the department’s previous stance on this issue. The statement means the Treasury secretary thus far has not determined that there was an “act of terrorism” pursuant to the Terrorism Risk Insurance Act (TRIA) — the statement does not mean the Treasury secretary has officially and conclusively ruled that the Boston bombing was not an act of terrorism under TRIA.
Jon Cowen, an attorney at Boston-based law firm Posternak, Blankstein & Lund, told Ãå±±ÂÖ¼é that he doesn’t believe there was an official declaration from the Treasury secretary pursuant to TRIA that the bombing does not constitute an act of terrorism. It could be a statement simply saying that at this point, the Treasury secretary has not made a determination that it constituted an act of terrorism, he said.
The federal statute requires that for the federal terrorism backstop for insurance claims to be triggered, an event must be certified by the secretary of the Treasury — in concurrence with the secretary of state, and the attorney general of the United States — to be an act of terrorism. Within TRIA, currently there is no statute showing by when a determination might need to be made.
$5M Threshold
The Treasury may not have made a conclusive determination, but one of the criteria for the certification under TRIA is a $5 million property/casualty claims threshold, and it appears the threshold has not been met.
Massachusetts Insurance Commissioner Joseph Murphy told Ãå±±ÂÖ¼é in April that with claims as of Jan. 24, 2014, there were 207 Boston bombing-related P/C claims that were reported by the state’s top 25 insurers and the residual market insurer, and that among them, some 96 percent have been resolved, with the overall paid loss of about $2 million.
Robert Hartwig, economist and president of the Insurance Information Institute, said “it is clear that the $5 million threshold was the principal criteria that was not met” pursuant to TRIA. “If any of the criteria are not met, it cannot be certified under law. And it’s clear that it fell short of the $5 million threshold,” he said.
Most local businesses with property and business interruption losses from the bombing did not have separate terrorism coverage at the time. And that meant there probably could have been coverage gaps had the terrorism exclusions applied if the event was certified as an act of terrorism pursuant to TRIA. Massachusetts Division of Insurance said in April that it wasn’t aware of any terrorism exclusions being applied to coverages related to the bombing.
The Massachusetts Division of Insurance’s data from January showed that among some 160 commercial property and business interruption claims made as a result of the bombing, less than 14 percent had separate terrorism coverage.
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