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Malicious Attack and Terrorism Insurance – Does Your Commercial Insurance Coverage Leave You Vulnerable?

Canada is, unfortunately, no stranger to horrific attacks causing irreparable harm to our communities. Since the École Polytechnique massacre in 1989, incidents of terrorism and malicious attack in Canada have, very sadly, increased. We are now familiar with the attack on Parliament Hill in 2014, the Quebec City mosque shooting in 2017, the Toronto Danforth shooting in 2018, and the more recent mass shooting in Nova Scotia in 2020, to name only a few. 

Despite this reality, most Canadian businesses have not updated their insurance policies to reflect the risks to which they are most exposed today. While some commercial insurance policies include wording for terrorism and sabotage, they often exclude the majority of exposures.

In response to this immediate need, our Political & Security Risks experts have created a comprehensive, all-inclusive program that fills the gaps in coverage while remaining cost effective: Packaged Malicious Attack & Terrorism Insurance.

Why Terrorism Coverage Needs Improvement
Following the September 11, 2001 attack on the World Trade Center, two key developments took place in the world of insurance: Property insurance programs began excluding Terrorism and, in 2002, the U.S. government passed the Terrorism Risk Insurance Act (TRIA).

With a federal backstop in place, insurers could provide coverage for catastrophic terrorist attacks, plugging the gaps that now existed within in Property insurance programs. Terrorism policies were written, and in North America, these were tailored predominantly for U.S. corporations.

Terrorism cover could also be “written back” into Property programs, but on a restricted basis. In Canada, since there is no federal backstop, insurers found solutions that limited the extent of their liability. For example, expanding the War exclusion, or drafting wording to ensure that liability was capped. So, while some commercial insurance policies include terrorism wording, they often exclude many exposures or have marginal limits that don’t reflect proper risk exposures.

Despite its clear definition in the Canadian Criminal Code, there is no standard definition of terrorism across insurance policies. The solutions that are being offered to Canadian businesses often include unique definitions of this term which result in a very limited application. Additionally, the multitude of exclusions within these policies can negate coverage in the event of a claim that does suit that specific definition.When malicious attack insurance is offered to “broaden this coverage” for Canadian businesses, it is often created independently of their terrorism insurance, resulting in competing exclusions, which make coverages inapplicable to the most common attacks.

In short, if you do have malicious attack or terrorism wording included in your current policy, it’s likely that it does not cover the majority of your exposures. For those that it does cover, it's likely that the limits provided are insignificant. Moreover, coverages available today were likely unavailable three or five years ago.

Have you reviewed the definitions and exclusions of terrorism within your policy recently? We recommend doing so today.

Why do I Need Malicious Attack Insurance if I Already Have Terrorism Coverage?
Your terrorism insurance is likely to be restrictive, requiring the act to be politically, religiously, or ideologically motivated. Today, we are seeing an increase in attacks that don’t meet this definition. This means that your insurance needs to adapt and expand to include coverage that indemnifies you in the event of an attack.

The distinction between a malicious and terrorist attack can become blurred when making a claim. For example, if a perpetrator’s attack is rooted in their pro-life stance – is this a political, ideological, or religious motivation? Or, is it a personal belief? What is the context behind them taking this position? Is it sufficient enough to explain their actions? Having insurance coverage for both Malicious Attack and Terrorism broadens your coverage.

Have You Considered Your Terrorism Liability?
Terrorism Liability is typically excluded from general liability policies, meaning that if you are held liable for damages by third parties or employees who are injured in a terrorist attack, you have no cover. This is a significant exposure that should not be left unmitigated. We include Terrorism Liability to fill this gap in coverage.

EQUA’s Solution – Packaged Malicious Attack and Terrorism Insurance
In one clear policy, this insurance solution provides holistic malicious attack and terrorism coverage – from property damage to business interruption and a number of additional add-ons, with limits up to CAD $50 million in aggregate. Our business interruption coverage does not require physical damage when following a Malicious Attack – even business interruption that results from the threat of terrorism or malicious attack is covered. With Difference-in-Conditions available, we can fill the gaps in your current coverage and provide excess coverage where you need it most. Additionally, all documents are issued and underwritten in Canada, and are built for Canadian law.

Let’s Get to Work
Are you ready to obtain proper coverage for these major risks? With a single-page application, we can provide quotes as quickly as within 24-hours. We’re also happy to assess your current coverage to identify your vulnerabilities. Email to get started today.

Tamsin Plumptre, Credit, Political and Security Risks Leader