A Look Back at Boston Marathon Insurance Claims

On April 15, 2013, two brothers placed pressure cooker bombs near the finish line of the Boston Marathon. The devices quickly detonated, killing three people, injuring more than 260 others, and causing property damage in the adjacent area.

The resulting property damage raised the possibility that the federal Terrorism Risk Insurance Act (TRIA) would be triggered for the first time. Under the program, the government shares the costs of some claims caused by terrorist acts.

Under TRIA, an event is not considered a terrorist act unless the U.S. Treasury, the Secretary of State and U.S. Attorney General all certify it as an act of terrorism. The act must endanger life and property and must have been taken to influence the public or government policy. Also, TRIA is only activated if there is at least $5 million of aggregate P/C losses.

TRIA was not triggered because the Treasury never certified the Marathon bombing as a terrorist event. The industry and public never learned why it was not immediately certified as a terrorist event. As it eventually turned out, the criteria that P/C losses total more than $5 million was never reached.

Nine months after the attack, the Massachusetts Division of Insurance (DOI) collected data from the top 25 property/casualty insurers and the Massachusetts FAIR Plan.

The data call showed that among the 160 commercial property and business interruption claims, just 13.5% had separate terrorism coverage. No residential property claims had separate terrorism coverage. None of the claims were impacted by a terrorism exclusion.

The data call also revealed that:

• Health, P/C and workers’ compensation companies combined were projected to pay $24.9 million for claims.
• Total P/C losses (plus case reserves) for 207 claims totaled approximately $2.5 million. The average P/C claim size was $9,185.
• 100% of 45 residential property and personal auto claims were resolved; 36 with payments and 9 without payments. Insurers paid more than $182,000 for these claims.
• Almost 94% of the 160 commercial property and business interruption claims were resolved; with 12 of 27 property claims ending in payments and only 65 of 133 business interruption claims closed with payments. Insurance companies paid about $2 million for commercial property damage and business interruption.
• Five persons had workers’ compensation costs estimated under $200,000.