(July 2018)
The National Council on Compensation Insurance (NCCI) Workers Compensation and Employers Liability Insurance Policy approach to terrorism exposures differs from those of the Insurance Services Office (ISO) and the American Association of Insurance Services (AAIS) because workers compensation coverage differs from all other lines of business.
Workers Compensation coverage is provided by referring to state law and not actually describing the coverage itself. This means that a single method of excluding or including terrorism would require legislative actions in each of the states.
However, the terrorist acts of September 11, 2001 raised questions about the insurance industry's ability and capacity to absorb such losses. The total potential losses for all lines of insurance created by such acts could be staggering.
Related Article: The Terrorism Risk Insurance Act (TRIA)
Unlike all other lines of business, terrorism coverage cannot be rejected because workers compensation benefits apply to all injuries an employee sustains while on the job and from any cause and that includes losses that arise out of, are caused by, or result from acts of terrorism. As a result, the named insured does not have the option to reject terrorism coverage under workers compensation insurance and every workers compensation policy should include a premium charge for this coverage.
The following endorsements are required to be attached to all workers
compensation policies.
WC 00 04 21 D–Catastrophe (Other than Certified Acts of Terrorism) Premium Endorsement
This endorsement notifies the named insured of the premium charge(s) the insurance company makes for losses that may result from a catastrophe other than a Certified Act of Terrorism that the policy covers. It specifically states that the premium charged does not apply to Certified Acts of Terrorism subject to WC 00 04 22 B explained below. It defines "Catastrophe," "Earthquake," Non-certified Act of Terrorism," and "Catastrophe Industrial Accident." It has a schedule for the states, rates, and premiums that apply to the coverage this endorsement provides if that information is not entered in Item 4 on the Information Page.
WC 00 04 22 B–Terrorism Risk Insurance Program Reauthorization Act Disclosure Endorsement
This disclosure endorsement addresses requirements of the Terrorism Risk Insurance Act (TRIA) of 2002, the Terrorism Risk Insurance Program Reauthorization Act of 2007 and the Terrorism Risk Insurance Program Reauthorization Act of 2015 that amended and extended TRIA. It notifies the named insured of certain limitations under the Act and explains that the insurance company charges premium for losses that may occur if an Act of Terrorism takes place. It defines "Act," "Act of Terrorism," "Insured Loss," and "Insurer Deductible." It establishes the insurance company's limitations of liability and has a schedule for the states, rates, and premiums that apply to the coverage this endorsement provides if that information is not entered in Item 4 on the Information Page.
Note: WC 00 04 22 B does not exclude or broaden coverage. It explains how the TRIA cap operates and states that coverage is not available once terrorism claims exceed $100 billion. This is very important because this is the only situation where Workers Compensation Coverage A is capped or has a limit. Losses that exceed this amount are pro rated and an employee may not receive full benefits.