Agents for the Community

Agents for the Community presented by

Shafer Insurance Agency • Knoxville

In this series, Penn National Insurance and Insurors are recognizing some of the work our members do for their communities. During Convention, the new "Penn National Agents for the Community" Award will be presented to one of the featured agencies.

The Insuror: Why is community service such an important part of your agency?

Shafer: Not only are we committed to our clients, we are committed to serving and strengthening our community. For more than 50 years, we have supported and been active in numerous charitable organizations that allow us to partner with our clients and our community in tangible ways. This is an integral part of our organization’s culture, and we encourage our employees to volunteer. Each year our team members volunteer an average of 850 hours.

The Insuror: What are some of the main causes/ groups you support? How and why did you get started with them?

Shafer: United Way of Greater Knoxville has been one of our favorite community organizations almost since our agency started. Both Bo Shafer and Andy Shafer have served on the Board of Directors and as Campaign Chairs, helping to raise millions of dollars. Traci Taylor, COO, chairs an OBI Committee, and Stanton Oster, one of our client executives, serves on an OBI Committee. Our staff recently completed our company pledge campaign with 100% participation!

Salvation Army is another amazing local organization that serves people in all walks of life. Andy is currently on the Board, and our team participates in the Red Kettle bell ringing every year. With the Helen Ross McNabb Center, we are honored to sponsor a dinner and “adopt” children for the holidays each year. The Second Harvest Food Bank leads our community in the fight to end hunger, and we participate in the No Empty Plates fundraiser to raise awareness of hunger issues. We are blessed to help our local senior citizens through SCHAS Senior Assistance, where we sponsor the award dinner, donate to the endowment fund, and “adopt” senior citizens at Christmas.

Other local nonprofits that we partner with include the Friends of The Smokies (Evergreen Ball), YOKE Youth Ministries (annual Golf Tournament), and Young Williams Animal Center (Mardi Growl). We also donate to the YMCA, Fellowship of Christian Athletes, Emerald Youth Foundation, the Cerebral Palsy Center, Leukemia & Lymphoma Society and Boys & Girls Club. Our employees held drives and fundraisers for Big Brothers Big Sisters, Family Justice Center and The Wesley House. The Insuror: What do you think it means to clients to see their insurance agent involved in their community?

Shafer: We want our clients to know that we value what they value. We believe, “to whom much is given, much is required” and we live that out every day in how we treat our clients and our neighbors. Everyone benefits when we all work together to create a better community.

Andy Shafer presents a donation to the Second Harvest Food Bank

The Insuror: Do you feel this service work adds to the "staff culture" of your agency?

Shafer: Absolutely! Our staff not only does their best for our clients, but they also give their best to our community. We want our team to have opportunities to expand their work in the community, and we provide paid time off for them to volunteer each year. Much like it takes many people with different talents to create a perfect team, it takes those same multi-talented people to create the best community. “Little becomes much” when we all work together and combine our talents and skills.

The Insuror: How could our industry as a whole do a better job of supporting the communities they insure?

Shafer: Fortunately, many of our industry peers are already doing what we do – identifying the need and finding tangible ways to help meet that need. As an industry, we should continue to encourage one another and our teams to expand our horizons and keep looking for new community investment opportunities.

The Insuror: Thank you for giving us your time, and we appreciate the work you're doing.

Shafer: Thank you, Insurors! You do great work and your efforts are essential to our industry. u

• Limitation Of Coverage For Certified Acts Of Terrorism (Sub-Limit On Annual Aggregate Basis) Endorsement (IL 09 87 01 15). This endorsement is used to limit coverage for “certified acts of terrorism” by providing coverage on a sub-limited bases subject to an annual aggregate.

These are the only exclusionary/limiting endorsements applicable to the Nashville bombing. Thus, these are the only endorsements considered in this article.

Location Matters: The State in Which the Property is Located

All three endorsements introduced above contain a fire exception that gives back coverage for direct losses caused by fire. Notice that this fire exception gives back coverage for direct loss only; even when the exception applies, there is still no coverage for indirect losses such as the loss of business income caused by the excluded acts.

However, this fire exception applies only in states specifically listed in the endorsement. Further, the only states the carrier will list in the endorsement are Standard Fire Policy (SFP) states that do not allow any policy to be more restrictive than the Standard Fire Policy. But, to complicate matters, some SFP states have adopted special statutory provisions allowing the exclusion of fire for acts falling within the meaning of a “certified acts of terrorism” or simply “terrorism.”

Confused? Let’s try to clarify the situation. Following are three lists. The first lists the SFP states that do not allow direct fire damage to be excluded. The second provides information on those SFP states that allow fire resulting from terrorism (“certified acts” or not) to be excluded, but only under specific conditions. The third and last lists the SFP states that allow fire to be fully excluded when the damage is caused by either a “certified act of terrorism” or “terrorism” (depending on the endorsement attached). SFP States that Do Not Allow Fire to be Excluded • California: West Ann. Cal. Ins. Code § 2070; West Ann. Cal.

Ins. Code § 2071 • Georgia: G.A. Code Ann. § 33-32-1 • Hawaii: HRS § 431:10-210 & Memo 2007-6 issued 12/27/07 • Illinois: 215 ILCS 5/397 • Iowa: I.C.A. § 515.109 • Maine: 24-A M.R.S. A. § 3002 • Missouri: 20 CSR 500-1.100 & Bulletins 2002-03 and 2003-01 • New York: McKinney's Insurance Law § 3404 • North Carolina: N.C.G.S.A. § 58-44-20 • Oklahoma: 36 Okl.St.Ann. § 4803 • Oregon: O.R.S.§742.206 to 742.242 • Washington: RCWA 48.18.120; RCWA 48.18.140 • West Virginia: W.Va. Code, § 33-17-2 • Wisconsin: Bulletin 2-7-2008 issued 2/07/08

SFP States that Allow Fire Excluded in Certain Circumstances • Arizona: Cannot be applied to buildings w/4 dwelling

units. A.R.S § 20-1503 • Connecticut: Tied to the expiration of TRIA. C.G.S.A. § 38a-306; C.G.S.A. § 38a-307a. Statute does not allow the exclusion of terrorism in condo policies but may exclude in other commercial property policies. • Massachusetts: Appears to allow the exclusion under

M.G.L.A. 175 § 99 - unless TRIA expires. • Nebraska: Only applies if the terrorism loss is caused by nuclear reaction, nuclear radiation or radioactive contamination. Neb. Rev. St. § 44-501.01. • New Jersey: Only if property premium greater than $10,000 - N.J.S.A. 17:36-5-20 and 17:36-5-20b • Rhode Island: Exclusion allowed only for large commercial risk specifically described in the statute. Gen. Laws 1956, § 27-5-3; 27-65-1 • Virginia: Excludes coverage unless TRIA expires. VA Code

Ann. § 38.2-2102

SFP States that Allow Fire to be Excluded w/ No Conditions • Idaho: I.C. § 41-2401 • Louisiana: LSA-R.S. 22:1311 • Michigan: M.C.L.A. 500.2834 • Minnesota: M.S.A. § 65A.01 • New Hampshire: N.H. Rev. Stat. § 407:22 • North Dakota: NDCC 26.1-39-06 • Pennsylvania: 40.P.S. § 636

If the insured property is located in an SFP state that does NOT allow the policy to exclude direct damage by fire, confirm it is listed on the endorsement. For properties with conditions, confirm whether the condition applies and confirm the state listed on the endorsement is the condition does not apply. Properties within the last list will not be listed by the underwriter, but it doesn’t hurt to ask (mentioning that it’s a Standard Fire Policy state).

Note that Tennessee is not contained in any of the three lists. Fire damage resulting from a “certified act of terrorism” can be excluded.

What is Excluded?

Only one exclusionary trigger is found within the three applicable endorsements. Only “Certified acts of terrorism” is excluded. A “certified act of terrorism” is defined in the endorsements as follows:

"Certified act of terrorism" means an act that is certified by the Secretary of the Treasury, in accordance with the provisions of the federal Terrorism Risk Insurance Act, to be an act of terrorism pursuant to such Act. The criteria contained in the Terrorism Risk Insurance Act for a "certified act of terrorism" include the following:

1. The act resulted in insured losses in excess of $5 million in the aggregate, attributable to all types of insurance subject to the Terrorism Risk Insurance Act; and 2. The act is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce

the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

Answering the Question

This article has taken the long way around to finally answer the question, do Warner’s actions trigger the exclusion found in the various terrorism endorsements? Unfortunately, there are two answers: “no” and “maybe.” At least “yes” is not one.

First, understand that the answer to the question is not based on whether Warner is considered a “terrorist.” There is no mention of the term “terrorist” anywhere in the endorsements. So, whether the damage is caused by a terrorist is irrelevant. The exclusion or limitation applies only when the act falls within the meaning of a “certified act of terrorism.”

“Certified Act of Terrorism” Until the Secretary of the Treasury certifies the act, the exclusion does not apply. Regardless what a city, county, state, the FBI or even the press thinks about the act, only the Secretary of the Treasury can certify the act. Without this certification, the exclusion or limitation does not apply. (According to the law, the Director of Homeland Security plays a part, but that position/person is not addressed in the definition.)

If the Secretary certifies the act, two other hurdles must be jumped before the exclusion applies. First, the total damage of the event must exceed $5 million. Second, the act must be one that is a violent act or an act that is dangerous to human life, property or infrastructure and is committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

Without a clear motive and Warner’s reported apparent attempts to avoid injury to persons, it’s unlikely his actions will meet this requirement. It is unlikely the event will reach the level of or be considered a “certified act of terrorism.” Any carrier attempting to apply the exclusion or limitation absent that requirement is wrong in their denial.

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Wrapping Up

Based on these requirements, it is unlikely any of the current terrorism exclusions or limitations can or will apply to this event. Without the necessary “certification,” carriers can’t apply the exclusion “just because.” About the Author

Chris J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, joined the insurance industry in 1990. He is the Executive Director of the Big "I" Virtual University. His current duties involve researching, writing, and teaching on P&C coverage topics. u

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