OGC Opinion No. 06-11-18

The Office of General Counsel issued the following opinion on November 20, 2006, representing the position of the New York State Insurance Department.

Re: Terrorism Risk Insurance Extension Act of 2005 and Agricultural Industry Exposure

Question Presented:

Does the Terrorism Risk Insurance Extension Act of 2005 ("TRIEA")¹ cover livestock or crop insurance in the event of a terrorist attack?

Conclusion:

No. TRIEA does not cover livestock or crop insurance. In the event of a terrorist attack involving damage to livestock or crops, private insurance companies or federal programs that provide such coverage may provide coverage, depending upon the terms of the policies. The Department has not approved any terrorism exclusions from policies that provide livestock or crop insurance coverage. However, those policies may contain other exclusions that apply.

Facts:

No specific fact pattern was provided.

Analysis:

The Terrorism Risk Insurance Act of 2002 (Pub. L. 107-297, 116 Stat. 2322) (the Act) established a temporary Federal program that, in the event of a major terrorist attack, allows the insurance industry and the federal government to share losses according to a specific formula.

The Act covers certain acts of terrorism in regard to "property and casualty insurance", as that term is defined in Section 102(12) of the Act. Section 102(12)(B) of the Act excludes "federal crop insurance issued or reinsured under the Federal Crop Insurance Act, or any other type of crop or livestock insurance that is privately issued or reinsured."

The Act was scheduled to expire on December 31, 2005. TRIEA, which was signed into law on December 22, 2005, amends the Act and extends it through December 31, 2007. Livestock and crop insurance are still excluded under TRIEA. In addition, TRIEA now excludes farmowners multiple peril insurance.²

Since TRIEA excludes livestock and crop insurance, in the event of a terrorist attack, such policies issued by private insurers or federal programs may provide coverage for terrorist attacks, depending upon the language of the policies. The Department has not approved any terrorism exclusions under livestock and crop insurance policies. However, those policies may contain other exclusions that apply.

For further guidance on this subject, the inquirer was directed to the following Department Circular Letters and OGC Opinion (which are currently available on the Department's website located at http://www.ins.state.ny.us):

Circular Letter No. 1 (2006) January 18, 2006

Circular Letter No. 25 (2002) December 23, 2002

Supplement No. 1 to Circular Letter No. 25 (2002) February 19, 2003

Opinion No. 03-04-05 (April 1, 2003) entitled "Livestock Insurance and Terrorism Risk Insurance Act of 2002."

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.

¹ Public Law 109-144, 119 Stat. 2660.

² Farmowners Multiple Peril Insurance is defined by the National Association of Insurance Commissioners (NAIC) as: "A package policy for farming and ranching risks, similar to a homeowners policy, that has been adopted for farms and ranches and includes both property and liability coverages for personal and business losses. Coverages include farm dwellings and their contents, barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock." See NAIC Annual Statement Instructions- Property Sept. 2006, Appendix P. 402.