Blog Question: If damage occurs during the Brisbane G20, would it be classified as terrorism?

G20 2014 Australia Logo

G20 2014 Australia Logo

This is a question that has been asked of me many times of late, particularly since the downing of ML17 as there is concern that there may be even more protests that originally thought.

The position is that there is not an industry standard exclusion for terrorism, but most are very broad in their application. With commercial premises, Insured’s pay a terrorism levy that goes to fund a Federal Government Terrorism Pool (the “Pool”), which is designed to provide cover. This was set up after the attack on the World Trade Center after September 11.

In cases where the Federal Government (there is a specific process to be followed) declares an event an act of terrorism, the claim would still be met subject to the terms; conditions, sums insured; limits and sub-limits of liability and where the loss is in excess of the insurers retention under the pool arrangement which, from memory, is $100,000, the Pool would pay the balance.

If a business was not insured then they would not have access to the Pool. Like any other event they would be treated as uninsured (or should be).

The whole question is difficult as it is all bound up in politics.

This disconnect between the wording of the exclusion and the governments willingness to declare an event as an act of terrorism is complicated. In my opinion the government will not rush in to a declaration for a couple of reasons. The first is that it could damage (further damage) tourism to this country that such an event would cause. Secondly, the Federal Government is taking out a significant amount of dividends from the Pool (a hidden tax on insurance) and this “dividend” may have to be reduced if the pool was seriously eroded by claim payments.

For example, when the Cronulla Riots occurred in 2005, this would have fallen under most terrorism exclusions but the government did not declare it as an act of terrorism and so insurers met the losses, (material damage and business interruption) as occurring as a result of the peril riot.

At the end of the day, an insured should be covered for damage and disruption caused by riot or an act of terrorism if they have insurance in place. However they will not be covered for closure or disruption due to the hosting of the event itself.

I hope this explains the position.

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