State Farm says no nuclear insurance for automobiles

By Kathy Helms-Hughes
STAR STAFF
khelms@starhq.com

   In the event of a nuclear attack by terrorists, your home and your car could become unfortunate casualties. But don't look to write off the loss on your insurance.
   State Farm Insurance Co., the nation's largest auto insurer, has joined a host of other insurance companies that have excluded nuclear-related automobile claims from their policies. Most insurers' auto and homeowners policies contain similar exclusions.
   Shawn Johnson, media spokesman for State Farm, said Monday that the company filed an exclusion for nuclear events in Tennessee, as well as most of the rest of the nation, on its auto policy.
   "It's extremely common in the industry. As a matter of fact, we're one of the few auto insurers that don't have this exclusion on our policy," Johnson said.
   However, State Farm has had the exclusion in its homeowner policies for many years. "During a periodic review, we decided to go ahead and add the (auto) exclusion and it's been approved in Tennessee and will go into effect on a rolling basis as auto customers renew, starting April 1," he said. Nuclear events will not be excluded until then.
   According to Johnson, the vast majority of auto insurers added the exclusion due to the nature of the risk. "Basically, a nuclear event is the type of catastrophe that could very easily test the financial strength of a company and cause an insurance company to go insolvent," he said.
   State Farm received approval for the exclusion last November. Johnson said though many news agencies have tried to link the exclusion to the terrorism threat, "it's not geared toward terrorism." The exclusion guards against losses stemming from a nuclear device or a nuclear event of any kind, whether accidental or intentional, he said.
   "If we covered a nuclear explosion, that could very easily cause our company to go insolvent, and then everyone else out there that had a policy and expected to be covered for an auto accident might not be," Johnson said.
   When the story broke last week about State Farm sending out notices to its 40 million policyholders, All-State Insurance companies were notified by their home office of the company's position, according to April Eaton-Robinson of All-State Insurance media relations.
   "All-State has an exclusion from coverage for auto physical damage in the auto policy for loss due to radioactive contamination, and that exclusion has been in place since the 1980s," she said. "All-State's homeowners' policy has an exclusion for damage due to nuclear reaction, and that exclusion also has been in place for many years."
   Carol Chase of Laws-Troutman Insurance Agency in Elizabethton, said insurance companies now are sending out letters or attachments to every policyholder to notify them of terrorism coverage.
   "We have to include terrorism because President Bush signed a law in November that requires all insurance companies to provide terrorism coverage," Chase said.
   The Terrorism Risk Insurance Act requires the federal government to pick up most of the insurance losses in a terrorist attack. Bush signed the bill into law in hopes of restarting construction projects which had been suspended after the Sept. 11 terrorist attacks in New York and Washington, D.C.
   According to the president, the lack of terrorism insurance held up or canceled more than $15 billion in real estate transactions. With the terrorism insurance in place, Bush said, the nation could address financial losses and get the economy back on its feet as quickly as possible should another terrorist strike occur.
   The law now requires the federal government to pay 90 percent of the cost of an attack by foreign terrorists for losses greater than $10 billion and up to $100 billion. For losses less than $10 billion, the government will pay a smaller amount.