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What Does ‘Terrorism Exclusion’ Mean for Business Insurance?

03.16.2015 By Elliott Insurance Insurance News

Although it’s something few of us would ever consider, and thankfully will probably never have to, it’s important to know that…

Although it’s something few of us would ever consider, and thankfully will probably never have to, it’s important to know that there is a terrorism clause in business insurance which precludes you from making a claim if injury, liability, cost or expense of any nature is related to an act of terrorism.

What is Considered an Act of Terrorism?

Below is an example of the definition of an act of terrorism in your business insurance Product Disclosure Statement:

Any act(s) of Terrorism

For the purpose of this exclusion an act of terrorism means an act, which may include but is not limited to an act involving the use of force or violence and/or threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s), which from its nature or context is done for, or in connection with, political, religious, ideological, or ethnic or similar purposes or reasons, including the intention to influence any government and/or to put the public, or any section of the public, in fear.

This means that there is generally no cover for these sorts of acts and is a standard exclusion criterion. This is the result of the global reinsurance market withdrawing cover for terrorism following the terrorist attacks on September 11, 2001 and businesses found that they could not get cover for terrorist events.

When Doesn’t the Terrorism Exclusion Apply?

The above terrorism exclusion does not apply if the act is deemed a ‘declared terrorist incident’ by the Federal Treasurer, which is in accordance with the Terrorism Act 2003.

This was illustrated recently when it was confirmed that Sydney businesses affected by the Martin Place siege would have their insurance payouts approved after Federal Treasurer Joe Hockey announced on Thursday January 15, 2015 that the siege would be declared a terrorist incident. Many businesses suffered as a result of the lock down in the area during the siege and Mr Hockey stated his decision would “ensure businesses that suffered damages from the incident will not be denied claims due to terrorism exclusions in their insurance policies”.

Although the Sydney businesses affected by the Martin Place siege will not have the terrorism exclusion applied to their claims, they will still need to have the right level of cover in place to ensure that their claims are paid. The terrorism exclusion clause is something few of us would ever need to consider but it’s important to be fully aware of the details of your business insurance policy.

For any insurance related questions or to obtain a quote on business insurance, contact Elliott Insurance Brokers on 1300 635 315 today and we would be happy to assist.