Study Says That Sept. 11 BI Claims Could Drag On For Years

Business interruption insurance claims arising from the Sept. 11 terrorist attacks involve a variety of unique, gray areas that will keep some claims dragging on for years, according to an international consulting firms study.

Business interruption claims will account for more than a quarter of the insurance claims to arise from the Sept. 11 events, according to the report by PricewaterhouseCoopers in New York. The company said such claims stretch across the financial services, communications, media and travel industries.

PWC noted that business interruption coverage generally requires “direct physical loss or damage to the property,” and is written to cover loss of gross earnings, which “result from interruption of or interference with the business, and caused by loss to real or personal property.”

However, the study found that claims surrounding Sept. 11 have raised questions not contemplated by underwriters and adjusters prior to the attack that have yet to be answered. Among the unresolved issues, the report noted, is how to evaluate liability for business interruption claims for firms that were not in the proximity of the events of Sept. 11.

Also undetermined, PWC said, is how to measure the period of interruption, how to differentiate such losses from the changes in the post-Sept. 11 economy and whether it is necessary to do so.

Business losses that easily exceed policy limits will be paid quickly in the next six months to one year, while complex claims, which are litigated, might drag on for four-to-six years, PWCs report said.

According to the report, future business interruption policies might restrict terrorism exposures through narrowing limits of liability, increased deductibles, selective underwriting and other means.

Business interruption rates, PWC found, are rising between 30 percent and 200 percent depending upon the loss experience of the insured. Deductibles in some cases, PWC said, have increased 10 times that of last years levels.

The study found that since Sept. 11, some insurance industry advocates are stressing that future policies should more clearly define terms such as “terrorism,” “uninsurable” and “uninsured political risk,” as well as distinguishing insured perils from uninsured elements.

PWC said these industry members were also suggesting that policies limit business interruption coverage to the direct consequence of physical damage from an insured peril, and not include as many possible consequences as are contemplated today.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Study Says That Sept. 11 BI Claims Could Drag On For Years

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