Minn. Excludes Terror Cover From Fire Policy

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NU Online News Service, April 8, 3:58 p.m.EDT?Minnesota Gov. Tim Pawlenty today signed into law abill excluding damage from a terrorist attack from standard firepolicies.

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The state now no longer requires standard fire policy insurancecontracts to cover a fire loss caused by a certified terrorism actif the insured refused coverage offered as mandated by theTerrorism Risk Insurance Act.

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Minnesota became the third state in three weeks to change thestandard fire policy, commonly referred to as the New York standardfire policy, following similar legislation by Virginia andNebraska.

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According to the Alliance of American Insurers, the insurancetrade group based in Downers Grove, Ill., other states may soonfollow suit--similar bills have been introduced in Connecticut,Louisiana, Massachusetts, Michigan, New Hampshire and Oklahoma.

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The Alliance noted that industry efforts to change the law arealso underway in Illinois, New Jersey, Pennsylvania and Washingtonas well as the 15 other states that require the New York standardfire policy.

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Bill Schroeder, vice president of the Alliance's Midwest region,argued that the standard fire policy creates a conflict with thefederal Terrorism Risk Insurance Act that is potentially dangerousfor the financial health of insurers.

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Mr. Schroeder said that since 9/11, it has become evident thatterrorist acts can produce not only horrific damage, but can alsocreate fires following the initial event that could be even moredevastating.

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When the federal government passed the terrorism backstop,however, it did not preempt laws regarding fire losses that couldbe caused by acts of terrorism. The changes in Minnesota law "allowinsurers to exclude coverage of such fire damage following aterrorism act under certain conditions. This will ensure thestability of the state's commercial insurance marketplace, Mr.Schroeder said.

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