The Office of General Counsel issued the following informal opinion on July 19, 2002, representing the position of the New York State Insurance Department.
Re: Terrorism exclusions in commercial umbrella policies
May a terrorism exclusion be included in a commercial umbrella insurance policy written by an authorized insurer?
A terrorism exclusion in a commercial umbrella insurance policy is not permissible if it is misleading or violative of public policy.
This was a general inquiry and no specific facts were provided. Since the inquirer only asked about commercial umbrella policies, which provide liability coverage only and not property coverage, this response will not address property insurance.
The Insurance Law and regulations issued thereunder do not expressly address terrorism exclusions. However, there are certain statutorily mandated coverages, such as certain types of motor vehicle insurance (including statutory automobile liability, no-fault insurance and uninsured motorist coverage) and workers compensation insurance, where a terrorism exclusion is not permitted.
In regard to umbrella policies providing non-statutorily required coverages, there is nothing in the Insurance Law that specifically restricts or otherwise limits the exclusions that may be contained in a liability insurance policy in this regard or that would otherwise require an insurer to provide coverage for damage or loss resulting from acts of terrorism. However, N.Y. Ins. Law § 2307(b) (McKinney 2000) states that the Superintendent may disapprove a policy because it is misleading or violative of public policy.1
Pursuant to § 2307(b), the Superintendent has rejected certain filings containing terrorism exclusions on the grounds that the policy forms were misleading and against public policy. Most notably, the Superintendent rejected the Insurance Services Office (ISO) terrorism form filings pursuant to § 2307(b), stating that, among other considerations, the definition of terrorism was overly broad and may result in exclusion of losses from destructive acts that fall well outside the publics perception of what constitutes an act of terrorism.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.
1Although a special risk insurer is exempt from filing policy forms for approval by the Superintendent, these standards are nonetheless applicable since N.Y. Ins. Law Article 63 (McKinney 2000) exempts special risk insurers from filing requirements only and not compliance and standards requirements as expressed in the Insurance Law and regulations promulgated thereunder.