Author: Chris Boggs

A Christmas Day explosion rocked Nashville, Tennessee. Officials believe 63-year-old Anthony Q. Warner is responsible for the blast that damaged several buildings, injured three people and reportedly killed Warner. Various reports state that Warner took steps to assure there were very few human casualties.

Although a definitive motive has yet to be established, investigators have discovered that Warner believed in some unusual conspiracy theories. The Associated Press reports that among these conspiracy theories, Warner believed that shape-shifting reptiles assume human form to take over society.

Regardless of Warner's beliefs, the question currently under discussion is, was this a “terrorist" act? Obviously, this question caused the ears of the insurance industry to perk up. If Warner's acts are judged by the FBI to be a terrorist act, might the terrorism exclusion apply to any damage caused?

Answering this question is initially more difficult than it appears. First, there are approximately 38 ISO terrorism-related exclusionary endorsements (this is not hyperbole for effect). Fortunately, only three of the 38 listed exclusionary or limiting endorsements apply to this situation. Second, certain conditions must be met before the endorsements are triggered.

Understanding that although “It depends" is an appropriate answer to any question regarding the applicability of the various terrorism exclusions, it's not a satisfying answer. An attempt to provide a more concrete answer is contained in the following paragraphs. If you don't care about any of the background and reasoning, jump to the end of the article to discover if the damage caused by Warner's actions is subject to any of the three TRIA-based exclusionary and limitation endorsements discussed in this article.

Date When Property Coverage is Written

TRIA, initially authorized in 2002, was reauthorized beginning 2015 and was set to expire on December 31, 2020. On December 29, 2019, President Trump signed the Terrorism Risk Insurance Program Reauthorization Act of 2019 extending the program until December 31, 2027. Because the program is not perpetual, requiring regular reauthorization, ISO was required to be “anticipatory" when they drafted the various terrorism exclusions– meaning they needed to draft endorsements in anticipation of the program being in full effect during the entire policy term, the program expiring during the policy term, or the expiration of the program without reauthorization.

Because the current act is in full force until December 31, 2027, any property policy that expires before December 31, 2027, is “guaranteed" to be fully backed by the act. For any property policy expiring prior to December 31, 2027, one of three exclusionary or limiting endorsements is attached:

• Exclusion Of Certified Acts Of Terrorism Endorsement (IL 09 53 01 15): This endorsement fully excludes coverage for “certified acts of terrorism." 
• Exclusion Of Certified Acts Of Terrorism Involving Nuclear, Biological, Chemical Or Radiological Terrorism; Cap On Covered Certified Acts Losses Endorsement (IL 09 86 0 15): This is attached to exclude coverage for “certified acts of terrorism," but only when such acts qualify as a nuclear, biological, chemical or radiological event. Other “certified acts of terrorism" are covered.
• Limitation Of Coverage For Certified Acts Of Terrorism (Sub-Limit On Annual Aggregate Basis) Endorsement (IL 09 87 01 15). This endorsement is used to limit coverage for “certified acts of terrorism" by providing coverage on a sub-limited bases subject to an annual aggregate.  

These are the only exclusionary/limiting endorsements applicable to the Nashville bombing. Thus, these are the only endorsements considered in this article.

Location Matters: The State in Which the Property is Located

All three endorsements introduced above contain a fire exception that gives back coverage for direct losses caused by fire. Notice that this fire exception gives back coverage for direct loss only; even when the exception applies, there is still no coverage for indirect losses such as the loss of business income caused by the excluded acts.

However, this fire exception applies only in states specifically listed in the endorsement. Further, the only states the carrier will list in the endorsement are Standard Fire Policy (SFP) states that do not allow any policy to be more restrictive than the Standard Fire Policy. But, to complicate matters, some SFP states have adopted special statutory provisions allowing the exclusion of fire for acts falling within the meaning of a “certified acts of terrorism" or simply “terrorism."

Confused? Let's try to clarify the situation. Following are three lists. The first lists the SFP states that do not allow direct fire damage to be excluded. The second provides information on those SFP states that allow fire resulting from terrorism (“certified acts" or not) to be excluded, but only under specific conditions. The third and last lists the SFP states that allow fire to be fully excluded when the damage is caused by either a “certified act of terrorism" or “terrorism" (depending on the endorsement attached).

SFP States that Do Not Allow Fire to be Excluded

• California: West Ann. Cal. Ins. Code § 2070; West Ann. Cal. Ins. Code § 2071
• Georgia: G.A. Code Ann. § 33-32-1
• Hawaii: HRS § 431:10-210 & Memorandum 2007-6 issued 12/27/07
• Illinois: 215 ILCS 5/397
• Iowa: I.C.A. § 515.109
• Maine: 24-A M.R.S. A. § 3002
• Missouri: 20 CSR 500-1.100 & Bulletins 2002-03 and 2003-01
• New York: McKinney's Insurance Law § 3404
• North Carolina: N.C.G.S.A. § 58-44-20
• Oregon: O.R.S.§742.206 to 742.242
• Washington: RCWA 48.18.120; RCWA 48.18.140
• West Virginia: W.Va. Code, § 33-17-2
• Wisconsin: Bulletin 2-7-2008 issued 2/07/08

SFP States that Allow Fire to be Excluded in Certain Circumstances

• Arizona: Cannot be applied to buildings w/4 dwelling units. A.R.S § 20-1503
• Connecticut: Tied to the expiration of TRIA. C.G.S.A. § 38a-306; C.G.S.A. § 38a-307a. Statute does not allow the exclusion of terrorism in condo policies but may exclude in other commercial property policies. 
• Massachusetts: Appears to allow the exclusion under M.G.L.A. 175 § 99 - unless TRIA expires.
• Nebraska: Only applies if the terrorism loss is caused by nuclear reaction, nuclear radiation or radioactive contamination. Neb. Rev. St. § 44-501.01.
• New Jersey: Only if property premium greater than $10,000 - N.J.S.A. 17:36-5-20 and 17:36-5-20b
• Oklahoma: Statute reads, “F. Notwithstanding any other provision of this section, the Insurance Commissioner may approve for use within the state any form of policy with variations in terms and conditions from the standard fire insurance policy provided for in this section." This may allow the exclusion of the fire following coverage, but the wording does not specifically address terrorism and fire following. 36 Okl.St.Ann. § 4803
• Rhode Island: Exclusion allowed only for large commercial risk specifically described in the statute. Gen. Laws 1956, § 27-5-3; 27-65-1
• Virginia: Excludes coverage unless TRIA expires. VA Code Ann. § 38.2-2102

SFP States that Allow Fire to be Excluded with No Conditions

• Idaho: I.C. § 41-2401
• Louisiana: LSA-R.S. 22:1311
• Michigan: M.C.L.A. 500.2834
• Minnesota: M.S.A. § 65A.01
• New Hampshire: N.H. Rev. Stat. § 407:22
• North Dakota: NDCC 26.1-39-06
• Pennsylvania: 40.P.S. § 636

If the insured property is located in an SFP state that does NOT allow the policy to exclude direct damage by fire, confirm it is listed on the endorsement. For properties with conditions, confirm whether the condition applies and confirm the state listed on the endorsement is the condition does not apply. Properties within the last list will not be listed by the underwriter, but it doesn't hurt to ask (mentioning that it's a Standard Fire Policy state).

Note that Tennessee is not contained in any of the three lists. Fire damage resulting from a “certified act of terrorism" can be excluded.

What is Excluded?

Only one exclusionary trigger is found within the three applicable endorsements. Only “Certified acts of terrorism" is excluded. A “certified act of terrorism" is defined in the endorsements as follows:

• "Certified act of terrorism" means an act that is certified by the Secretary of the Treasury, in accordance with the provisions of the federal Terrorism Risk Insurance Act, to be an act of terrorism pursuant to such Act. The criteria contained in the Terrorism Risk Insurance Act for a "certified act of terrorism" include the following:

1. The act resulted in insured losses in excess of $5 million in the aggregate, attributable to all types of insurance subject to the Terrorism Risk Insurance Act; and
2. The act is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

Answering the Question

This article has taken the long way around to finally answer the question, do Warner's actions trigger the exclusion found in the various terrorism endorsements?

Unfortunately, there are two answers: “no" and “maybe." At least “yes" is not one of the answers.

First, understand that the answer to the question is not based on whether Warner is considered a “terrorist." There is no mention of the term “terrorist" anywhere in the endorsements. So, whether the damage is caused by a terrorist is irrelevant. The exclusion or limitation applies only when the act falls within the meaning of a “certified act of terrorism." 

“Certified Act of Terrorism"

Until the Secretary of the Treasury certifies the act, the exclusion does not apply. Regardless what a city, county, state, the FBI or even the press thinks about the act, only the Secretary of the Treasury can certify the act. Without this certification, the exclusion or limitation does not apply. (According to the law, the Director of Homeland Security plays a part, but that position/person is not addressed in the definition.)

If the Secretary certifies the act, two other hurdles must be jumped before the exclusion applies. First, the total damage of the event must exceed $5 million. Second, the act must be one that is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

Without a clear motive and Warner's reported apparent attempts to avoid injury to persons, it's unlikely his actions will meet this requirement. It is unlikely the event will reach the level of or be considered a “certified act of terrorism." Any carrier attempting to apply the exclusion or limitation absent that requirement is wrong in their denial.

Wrapping Up

Based on these requirements, it is unlikely any of the current terrorism exclusions or limitations can or will apply to this event. Without the necessary “certification," carriers can't apply the exclusion “just because."

Click here for an interesting review of the history of TRIA from the Congressional Research Service.

Last Updated: January 29, 2021