Terrorist Attacks ---- Are Your Employees Covered?

Unfortunately terrorist acts seem to be dominating the news recently, and some Compensation folks may be hearing this question from employees: “Would I be covered if I were affected?”

The short answer is “not necessarily.”

And although statistically the risk of suffering from terrorist action may be small, as long as people think they are at risk, it's a problem.

So what exactly is terrorism? Some insurers say it is a matter for the government or other relevant jurisdiction to define. Others define possible terrorist events themselves according to their own criteria.

Clearly there is a lot of room for interpretation. Assuming your insurer agrees that your company and employees have been affected by terrorism would 1) employees be covered and 2) in what way exactly?

Just to show you the lack of uniformity among insurers:

1) Health insurers usually list any incident involving terrorism as a standard exclusion in their policies
2) Life insurance policies typically don’t have terrorism exclusions and proceeds would be paid to the designated beneficiary
3) Disability insurance policies may provide coverage for short or long-term injury
4) If a person is not physically injured, but needs treatment such as counselling in the aftermath of a terrorist attack, coverage may be provided if psychiatric treatment is covered in your policy

The one constant is Workers Compensation insurance. It is compulsory for all businesses—and it covers employees injured or killed on the job for any reason including terrorism and acts of war. Exclusions are not permitted.

As a result of 9/11 and in order to ensure that adequate resources were available for businesses to recover and rebuild if they became the victims of a terrorist attack, Congress passed the Terrorism Risk Insurance Act (TRIA) in 2002. It allowed the insurance industry and federal government to share losses according to a specific formula. TRIA has been renewed several times. The current law has been renamed Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) and will be in effect until 2021.

The formula referred to above creates a federal "backstop" for insurance claims related to acts of terrorism. Today, to trigger TRIPRA backstop funds, there must be proof that damages must reach a minimum of at least $100 million. This backstop effectively limits insurers’ losses, greatly simplifying the underwriting process. To trigger TRIPRA, any event in question must be classified as an act of terrorism by the U.S. Secretary of the Treasury, the Secretary of State and the Attorney General.

As TRIPRA includes property insurance as well, your company’s Risk Manager should understand the parameters of TRIPRA. Experts say that Workers Compensation is the most important insurance that is backed by TRIPRA--- much more than property insurance. It could be the biggest source of claims in any future terrorist attack.

With increased awareness of the risk of terrorism, it would be best for you and the Risk Manager to ask your insurance broker(s) for detailed clarification on what is covered and when under each insurance plan. It might also be a good idea for the two of you to agree on each other’s responsibilities as well as a detailed action plan so that execution, if needed, goes as smoothly as possible.

Experts say that the U.S. has not seen the last of terrorist attacks. Given that, the best crisis response is more proactive than reactive. Now is the time to prepare.

Jacque Vilet, President of Vilet International, has over 25 years’ experience in Human Resources. In her current role she works with start-ups and multinationals on both domestic and international HR issues. Jacque has an M.S. in Psychology and an MBA from Southern Methodist University. She speaks at conferences in the U.S. and overseas, contributes to various HR and talent management publications and conducts frequent webinars.

Comments

[E. James (Jim) Brennan]

Thanks, but common sense is a frequently uncommon commodity, Jacque. That said, terrorism is intimidation via threats of violence. When people are frightened enough to be coerced into accommodating otherwise objectionable behavior (i.e., "Don't displease them lest they kill you"), the terrorists have achieved their objective. IMHO, terrorists want media attention in order to persuade the general public to accede to their demands.

Experts observed long ago that the more desperate extremists become, the more violently they behave. Still, the statistical odds prove their threats are generally toothless. In a connected world where any one event gets global publicity, however, terrorists find it easy to "win".