The terrorist attacks on September 11, 2001 changed the lives of Americans in many ways. The effects have rippled through areas of life that would not, on the surface, have any obvious connection to terrorism. While most of the country was still focused on grief, fear, and how to deal with security issues, insurance companies were focused on a different kind of terror – the potential for claims massive enough to put them out of business.
Worker’s compensation insurance was not designed to handle claims for the massive deaths and injuries caused by terrorist attacks like the events of 9/11. Claims for terrorism can cost an insurer anywhere from $300,000 to $1 million per employee. Combine that price with the probability that a terrorist attack will involve a large group of people, and therefore a large number of claims, and the financial results can be devastating, even to an insurance company. Workers’ compensation laws prohibit insurance companies from excluding acts of terrorism from their policies.
Risk Classification
Classification of jobs as high risk used to be limited to occupations that carried a high potential for injury due to the type of work performed, and the conditions involved. This would include high-rise window washing, roofing, and other obviously dangerous careers. It would have been laughable to classify someone in an ordinary desk job as being at high risk for injury on the job. That has changed. Now companies with a large concentration of employees in a single building, or near a building that is considered a likely target for a terrorist attack are considered high risk.
Terrorism Risk Insurance Act
In 2002 Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA), a temporary federal terrorism backstop program that requires the federal government to pay 90% of the cost of an attack by foreign terrorists for losses greater than $10 billion, up to a total of $100 billion. The government will pay a smaller amount for losses less than $10 billion. TRIA was set to expire in 2005. The Terrorism Risk Insurance Extension Act of 2005 (TRIEA) extended the federal backstop, but changes were made, and insurance companies are required to pay out much more before the government begins to absorb the costs.
Stand Alone Terrorism Insurance
The market for and development of stand-alone terrorism insurance is growing. The changes in TRIEA were designed, in part, to take the burden off of taxpayers and encourage insurance companies to come up with products specifically to address terrorism risks.
Without a doubt, terrorism will continue to be a major factor in the evolution of workers’ compensation.
If you have questions about how workers compensation affects you in your particular employment situation or if you have a workers’ compensation claim, please contact an experienced workers compensation attorney today such as Harvey L. Walner & Associates in Chicago, Illinois.
