The Palm Beach Post

ANTHRAX RAISES INSURANCE QUESTIONS
By Jeff Ostrowski and Sanjay Bhatt

The insurance industry, already reeling from its costliest disaster ever, now must decide how to cope with the threat of biological attacks.

The anthrax outbreak at tabloid publisher American Media Inc.'s headquarters, which killed one employee, exposed two others and caused the building to be sealed off, raises new questions for property and health insurers.

Does business interruption coverage pay in case of an anthrax outbreak? Who pays should AMI be forced to move out of its Boca Raton headquarters? The answers are no clearer than the source of the mysterious outbreak.

"That's a whole new ballgame," said Joseph Annotti, spokesman for the National Association of Independent Insurers in Chicago. "Insurers are still scratching their heads on how to price policies since the World Trade Center. You have a whole new susceptibility with biological terrorism. Again, there's no history to go on."

Even before the Sept. 11 terror attacks, the price of commercial and personal insurance was climbing. With the cost of the attacks expected to exceed $30 billion, insurers say they'll exclude terrorism from new policies. Congress is debating whether to create an insurance pool to cover terror attacks.

The anthrax incident will cost only a fraction of the Sept. 11 attacks, so it's unlikely to affect rates, insurance experts said.

After the anthrax outbreaks in Boca Raton and New York, insurers likely will add bioterrorism to the list of risks they don't cover.

"It adds another dimension to the notion of terrorism," said Robert Hartwig, chief economist at the Insurance Information Institute. "It isn't only structures that can be damaged or destroyed by terrorists. Employees can be the targets of terrorists."

It's uncertain how the costs of the AMI outbreak will be divided among insurers, said Barry Ladis, president of Miami insurance broker Seitlin Property & Casualty. Workers compensation insurance likely will cover costs for AMI employees who were exposed to anthrax.

The Palm Beach County Health Department paid the costs of tests and antibiotics for AMI workers, so insurance coverage isn't an issue for them, said AMI General Counsel Mike Cahane.

As for business interruption insurance, that coverage pays if a company's offices are damaged and if the damage is caused by a covered peril, Ladis said. If AMI's anthrax proves to be terrorism, an insurer might consider that vandalism, a peril covered by business interruption insurance.

If the building must be destroyed, AMI's insurance coverage likely would pay for a new headquarters so long as investigators prove that terrorists or criminals intentionally contaminated the building with anthrax, Ladis said. If the anthrax outbreak was an accident, the question of coverage becomes murkier, he added.

Meanwhile, financial planners say the terror attacks and the anthrax scare have combined to make consumers more aware of the need for life insurance and disability insurance.

"It's on the top of people's minds now," said Donald Cohen of Newman & Cohen Financial Management in Boca Raton. "People used to put off thinking about life insurance."