Is terrorism covered under an Australian home and contents policy?
Last week I posted an article in regard to terrorism coverage under commercial property, and/or business interruption policies. I also touched on commercial liability coverage.
At the request of quite a few readers, I now turn my attention to home and contents.
In a day or two I will address Strata and after than residential landlord policies, and finally private motor. This timeline may be disrupted as I am scheduled to go to Vanuatu to assist with earthquake claims next week.
Strata in particular can be complicated where there is a mixture of residential and commercial unit holders. In the coming post my plain is for me to include some possible solutions where there is a gap in coverage under standard policies.
Turning back to today’s topic, that is home and contents policies, I start by explaining that general insurance coverage has been broken up by the legislation that allowed the establishment of the Australian Terrorism Pool Corporation into eligible and non-eligible policies.
“Eligible property is property located in Australia comprising:
- buildings (including fixtures) or other structures or works on, in or under land (roads, tunnels, dams and pipelines are examples of eligible property)
- tangible property located in, or on, such property, and
- property prescribed by regulation
Among the Scheme’s exclusions are:
loss or liability arising from the hazardous properties of nuclear fuel, material or waste;
residential property or the contents of residential property where the building has a sum insured less than $50 million;
farms, unless they hold insurance against business interruption;
life insurance policies that fall within the meaning of section 9 of the Life Insurance Act 1995, and
contracts of insurance to the extent that they provide cover for loss arising from computer crime.”
[emphasis mine]1.
With no reinsurance protection for terrorism under the Australian Reinsurance Pool Corporation it is up to individual insurers as to whether they will grant their home and contents clients coverage for terrorism.
I attach, at the end of this post, a 66 page summary of many of the home and contents policies available in Australia showing whether or not they offer terrorism coverage. I have sourced this information through www.policycomparison.com .
In summary, there is a real mixture of approaches in the Australian General Insurance market.
In many policies losses arising from an act of terrorism are Excluded while other policies have no exclusion in the wording.
Quite often we find that Defined Events wordings do not appear to exclude Terrorism but they do not mention it either. This is to be expected as terrorism can take many forms. What appears to be the position is that if say a terror attack caused a home to be destroyed by fire, then the loss would be considered under the peril of fire. If the terrorist caused a loss that was not insured say a flood by blowing up a dam, then there would be no cover under the Defined Events policy.
The Terrorism Exclusion, in some wordings, has a specific Exclusion for Explosion, Riot or Civil Commotion caused by terrorism. This is where the wording has a Defined Events cover and sometimes an Option for Accidental Damage. Often there is also a separate Terrorism Exclusion which appears to be a total exclusion.
None of the wordings that I reviewed that contained a Terrorism Exclusion specify any write back of cover.
My final thoughts on this are that in the past, what I have seen is graffiti or for want of better words, low level events such as graffiti with a racial, ethnic, religious bias. What this may lead to in today’s environment is more serious offences including arson.
At this stage I have not been involved in any severe losses involving terrorism to a home or its contents where the cause would fall within the definition of terrorism.
What we have seen in Los Angles is what is being described as eco terrorism where individuals or groups are setting fires which spread to involve multiple properties. This of course takes the risk to an individual insurer who may have elected to turn a blind eye to an exclusion to a single property loss, which I would like to think most Australian insurers would do, to a much higher level where the exclusion would be applied in full.
So, what does all this mean. I think this is something that we should all be aware of and assess each risk on its merits. The location of the risk to a potential terrorist target and the risk to certain members of our communities as occupants of a home does need to be considered against the terrorism coverage afforded by the home and contents policy being considered.
The focus of course should not just be on this one, hopefully very low risk. All the risks associated with any home and or contents need to be considered when arranging insurance coverage.
If anyone has any comments or thoughts on the subject they would like to add, please do so in the comments section below or contact me at allan.manning@lmigroup.com
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