Were the Boston Marathon Bombings acts of terrorism? Who gets to say? Who gets to pay?

Recovery from the Boston Marathon bombings continues as people, families and businesses try to return to some degree of normal life – or the new normal, as some have said. Medical bills, funeral expenses, long-term rehabilitation, property damage and business interruption are just some of the ways in which the bombers caused loss and untold grief for so many.

From a financial recovery perspective, it has not yet been determined if and how insurance will come into play. Why? Most insurance policies have a terrorism exclusion. Those policies that have the terrorism endorsement have to be enabled by classifying the bombing as terrorism.

So what were the Boston bombings – acts of terrorism and who gets to decide? U.S. Attorney General Eric Holder and Treasury Secretary Jack Lew will determine if it is considered an act of terrorism. That decision will begin a cascade of activity. The possibilities for recovery or litigation include

• any property or insurance policy held by the perpetrators
• a victim’s fund from which payments would preclude law suits
• those in charge of the event (the Boston Athletic Association, the City of Boston)
• compensation paid under the federal government’s Terrorism Risk Insurance Program. The federal program, however, does not kick in until $100 million in claims have been made.

As reported in the Insurance Journal, “‘The organizers of larger events tend to be more risk-aware and do contemplate acts of terror as a possibility under the terms of the coverage as a matter of course,’ said Ian Barnes of Cooper Gay, a British insurance broker.”

Businesses could be unhappily surprised to find that their insurance may not cover an act of terrorism. The cost of rebuilding their premises, their loss of sales and damaged inventory or spoiled food are likely being paid for out-of-pocket unless individual insurers have begun to pay. Also on the receiving end of the attack were the hospitals trying to care for so many victims at a huge and unanticipated cost. As with the 9/11 attacks, perhaps insurance companies will waive their exclusions.

Even though Boston is a major American city, most residents would say “It would never happen here.” That’s pretty much what the folks in Oklahoma City would have thought back in 1995 when the Murrah Federal Building was targeted and 168 people died. Let us hope this is not the new normal.

No matter the outcome, the victims are sure to receive some generous degree of help and businesses exposed to large events are likely to sit down with their insurance agents to re-visit terrorism coverage.

To contribute to the The One Fund / Boston 2013 that has raised $25 million thus far to aid victims of the bombings, click here.