After the September 11 terrorist attacks, insurance companies paid out billions in damages — more than ever before. So in 2002, Congress agreed to help in the future by creating federally insured — and relatively cheap — terrorism coverage for businesses.
Claims under that coverage were filed for the first time after the Boston Marathon bombings. But insurance companies haven’t paid out — because the federal government doesn’t consider the Boston Marathon bombing an act of terrorism.
After the marathon bombings, police and other investigators swarmed downtown and barricaded off whole blocks to examine what’s been called the most complex crime scene in history.
“Nobody knew if there was going to be more bombs or anything,” said Perry Geyer, whose company, Cybersound Studios, is around the corner from the bombing sites on Newbury street. He says as the manhunt for suspects continued, artists from across the country canceled recording sessions and Geyer lost thousands of dollars.
"In the back of my mind, the whole time when this happened, I was like, 'Wow, thank God I have the terrorism insurance — I’m sure this is going to cover it, if this isn’t a terrorist act, then what is?'"
There’s an answer to that question from the U.S. Secretary of the Treasury.
In an email yesterday, a spokesperson for the office said they have reviewed the events in Boston, and the treasury secretary did not find that there had been an "act of terrorism" under the Terrorism Risk Insurance Act.
That’s the act that Congress passed in 2002 to create this type of federally-backed insurance. Under the law, insurance companies only have to pay claims when property damage tops $5 million and the U.S. Attorney General and the secretaries of state and treasury certify it a terrorist attack.
Since that didn’t happen in the case of the marathon bombings, claims like Geyer’s, for $9,000, were denied. He’s since canceled his terrorism coverage.
"Why should I pay if I’m not going to receive anything?" he asked.
It’s confusing for Geyer and other business owners like him, especially since President Obama has called the marathon bombings an act of terror, and the Justice Department’s indictment of suspect Dzhokhar Tsarnaev charges him with federal crimes of terrorism.
The issue, says Robert Hartwig, president of the Insurance Information Institute in New York, is size and scope. He says terrorism insurance is meant to cover acts on the scale of the September 11 attacks.
“What terrorism insurance does, is it provides protection against those more severe losses — the type of losses that can put you out of business," Hartwig said. "Generally it’s not for the lower level claims that might arise, the less-costly type of claims.”
But Boston Mayor Marty Walsh says any formal distinction shouldn’t matter.
"Regardless of whether or not this was ruled an official act of terrorism, insurance companies should be willing to do anything and everything in their power to assist these businesses,” Walsh said in a statement.
One business is fighting back. Edward Borash says his Sir Speedy print shop on Bolyston still hasn’t fully recovered since it was shut for 14 days after the bombings.
"It was such a terrible, heinous act and I was never going to let a terrorist tell me what to do, or whatever, so I fought so hard to stay in business and be strong here,” Borash said.
He’s suing the agent that sold him terrorism coverage, and his insurance company, Magna Carta, for more than $1 million. Borash’s attorney, James Rudolph, says they misled his client.
"His agent never said, 'Listen, there has to be claims for $5 million, otherwise you’re not going to get anything,'" Rudolph said. "And his insurance agent never said, 'Listen, it has to be declared an act of terrorism by some politicians in Washington.’ Had he been told that, he might have said, 'Well this is ridiculous. They’re never going to do that.’”
Magna Carta declined to comment.
"My client completely denies that it acted improperly, and certainly denies that any misrepresentation was made," said said Kurt Fliegauf, attorney for the agent, Allan Insurance Agency in Salem. "We’re confident that we will prevail on the merits in court.”
As the case progresses, lawmakers in Washington are deciding whether this type of insurance will even continue to exist. If they don’t extend the Terrorism Risk Insurance Act, it expires at the end of the year, ending affordable federally backed terrorism coverage.
That would be unfortunate, says Robin Helfand of Robin’s Candy Shop on Newbury Street. She thinks businesses need this kind of protection. She still has her terrorism policy, even though after the marathon bombing, her claim for thousands of dollars lost in unsold truffles was denied.
"But you can imagine my concern," she said. "How do I insure this time that I have coverage because — God forbid a million times over — there’s another incident, I lose everything, and it’s not declared terrorism?”
If it happened again, Helfand says, her business might not survive.
