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Terrorism and your insurance coverage.

January 5, 2002

Since the tragic events on September 11, 2001 personal lines policyholders are wondering whether they have adequate insurance protection and appropriate documentation in the event of a terrorist related loss. As a footnote to the human tragedy, fine art valued at over $250 million was destroyed in the offices of the World Trade Center.

As of this writing, it appears that no insurance company has attempted to invoke a War exclusion to avoid a claim payment. In future, however, some insurance companies may specifically define terrorist acts and amend their definition of War within their policies. This could result in coverage restrictions or exclusions. Consequently, it is especially important to review your renewal policies carefully and discuss any changes with your agent.

Insurance companies that focus on the high net worth individual, like Chubb, Fireman’s Fund and AIG have always provided broader coverage, and we expect this to continue. For example, they offer additional living expenses of 30 days if a civil authority prevents you from entering your home. Most insurance companies provide no more than 14 days. For many residents of lower Manhattan who were not allowed back in their homes, this coverage is only too relevant. In times of uncertainty, we feel it is in the best interests of our clients to work with insurance companies that have a reputation for prompt and generous claims payment.

Pricing and coverage implications. We expect insurance rates to rise in all sectors of the insurance market, in part because of the increased risk but also because of the rising cost of reinsurance, which raises the operating costs of the insurance companies. This also means that individual insurance companies have a reduced capacity to provide large policy limits. Clients seeking coverage for large risks, for example, the owner of a multi-million dollar art collection, may have to obtain layers of insurance from more than one insurer.

Documentation. These recent events are a reminder of how important it is to have appropriate documentation in place before a loss occurs to expedite claim settlements. At Chartwell, we advise our clients to have updated appraisals on their residences and their collections, and we request copies for our files so that we can actively help with the claims process. In addition to qualified appraisers, we work with art dealers, designers and contractors to keep an inventory for our clients. A major loss is a disruption; poor documentation can turn the loss into a nightmare.

Chartwell Bulletins are produced by Chartwell Insurance Services, Inc. an independent insurance broker specializing in the personal asset protection of high net worth individuals. Chartwell Bulletins address issues of general interest and since coverages vary by company and by state, should not be taken as an interpretation of a particular policy or advice on any individual situation.

A representative of Chartwell Insurance Services, Inc. will be pleased to discuss all aspects of your personal insurance.  Contact: Rebecca Korach Woan | 312. 645.1200 | rwoan@chartwellins.com