Monthly Archives: March 2015

Library on a Roll

Seeing the reports in the paper that the Library here received a $500,000 challenge grant from the National Endowment for the Humanities reminds us that the Port Townsend Library is on a roll – for the last hundred years.  The Library was actually founded in 1898 as the Port Townsend Library Association and opened in a second-floor room of the Central School with a small collection of books donated by the founders.  Within a year it had almost 700 books and a circulation of nearly 2,000. By January of 1903, the association had purchased a lot on Lawrence Street for $400, intending to build a library and by January of 1907 the association and the city had begun talking with the Carnegie Foundation.  The foundation was providing funding for community libraries throughout the United States that met a standard of public support.  The foundation required the town receiving funding not only demonstrate the need for a public library, but provide the building site, and promise 10 percent of the cost of the library’s construction annually to support its operation. 
The Port Townsend Library Association had a site for the library and could demonstrate the need, so citizens petitioned the City Council for financial support. In April 1911 the City Council passed a resolution to create and support a free library. It was a good thing, too, since that same month, according to the Morning Leader, the school district served notice on the library that it had to move out of the school.  Circulation more than doubled in that first year May B. Smith, the Librarian, reported to the City Council and the number of registered borrowers went from 97 to over 500.  
Plans for a new library building were submitted to the Carnegie Foundation, and in the fall of 1912 the foundation agreed to give $12,500 to the City of Port Townsend to erect a public library building on the condition that the city continue the monetary pledge for maintenance and salaries.  The grand opening was held Oct. 14, 1913, with a citywide celebration.
The Library evidently served citizens locally with distinction during the first half of the 20th century.  It cooperated with local school officials during the depression to increase time for students to complete homework at the library.  New collections were developed for young children and expanded reference materials were made possible through funding by the Ladies Auxiliary of the American Legion and the Parent-Teachers Association.  In 1934, at the height of the depression, the library raised enough money to remain open following budget cuts, winning a special levy by a nearly four-to-one margin. In the 1940s, the library added story hours for young children.  

In 1987 a group of residents formed a Diamond Jubilee Campaign to renovate and expand the library which had become too small and was physically deteriorating.  City residents – by then numbering 7,000 – raised $800,000 for the expansion, and in June 1990 a renovated and expanded Carnegie library was opened.

Growth in the town has us on the verge of expanding the Carnegie again, but this time the historical nature of the library and its success in serving the people of Port Townsend is attracting a wider audience.  The NEH grant is only one of the honors the PT Library has received.  It has also received a “Star” award from the Library Journal for the second year in a row – one of only five libraries in the state to be awarded and it is perennially among the leaders in the state for circulation in its size category.

Truly, as the Port Townsend Public Library continues into its second century it remains on a roll and there’s more news to come.  

Licensed, Bonded and Insured

Licensed, bonded and insured is a phrase you see pretty often in advertising.  Licensing pretty much everyone understands.  In this state, like most others, many occupations have licensing requirements; in Washington State hundreds of occupations and professions from Accountants to X-Ray Technicians must be licensed and all licensing has some standard that must be met.  Insurance is also a pretty well understood concept.  We have it for our cars, our homes and various other areas in life we want to protect from financial risk so we know what it looks like; bonding, not so much.  Bonds are intended to be a form of guarantee and they protect the entity (person or organization) that requires the bond, not the purchaser.  The entity requiring the bond may be the state – in the case of an auto dealer surety bond – or a homeowner who hires a construction company in the case of a payment bond.  The bond is not insurance and a premium paid for a surety bond is actually a fee for the guarantee itself; it is not designed to cover potential losses.  What does the guarantee mean?  If a claim arises under a bond, the bonding company will pay against the claim and then recover the amount paid from the purchaser of the bond.  Therefore, purchasing a bond generally means assuring the bonding company of the good character and financial stability of the purchaser – they want to know the bond will be repaid.  And that is the benefit to you as a consumer; the assurance that the bondholder is willing and able to put their reputation and financial security behind their promise to do something. There are many bond types.  Auto dealer surety bonds are a form of occupational bond designed to guarantee to the state that an auto dealer will operate according to state laws and regulations.  A dealer who was sued for tampering with an odometer, for example, could find they have broken state law.  If there were a claim against their bond stemming from that, the bond issuer would pay the claim and recover the funds paid (up to the bond amount) from the bond purchaser.  Performance bonds of various kinds offer specific assurances about work to be performed:  construction or contract bonds are issued to protect the project owner by ensuring the fulfillment of a contract; maintenance or warranty bonds ensure a contractor will provide quality materials and workmanship and provides protection against defects in work for a project owner and site improvement bonds are often required by a government agency to protect public property from any losses associated with a private project. A site improvement bond offers assurance a developer will restore any public property damaged or changed during a project.  One form of bond of interest to the consumer is the payment bond which assures that labor and subcontractors will be paid. Bonds are sold under the assumption they will never be used, unlike insurance which assumes there is a level of risk that an event will occur.  That is why character, financial history and current financial history are so important in seeking and pricing bonds.  People with a history of defaulting on a bond payment are very unlikely to successfully purchase another bond.  In many cases, the bond issuer may even ask for collateral to assure the ability to repay.  Whether or not collateral is taken, privately owned companies will likely be required to provide the personal indemnity of the business owners as well as company indemnity. Rates for bonds are determined by the amount of the bond and through an assessment of an individual’s or business financial history, credit, and amount in liquid assets.  Insurance rates look backward to assess risk; bond premiums look forward to the ability to repay.  The reason for this is that bonding involves a guarantee of future performance and the bond issuer becomes the financial guarantor of that performance. Let one of our business insurance specialists discuss the importance of various insurance coverages and bonds for your business.  Call 888-433-0031 or visit the business insurance or bonds pages of the Homer Smith Insurance website at

Federal Crop Insurance Program – Another Public Private Partnership

We have written previously about the partnerships between the federal government and the private sector in complex insurance settings.  One is the National Flood Insurance Program which is a public – private partnership between the federal government represented by FEMA and almost 90 private insurance companies.  The partnership works to offer flood insurance to property owners and renters in communities that are part of the National Flood Insurance Program.  The Terrorism Risk Insurance Act enacted after 9-11 also cast the government in the role of partner with private insurers.  Both of these programs deal with managing a phenomenon called collateral risk –the occurrence of simultaneous losses from a single common event. Natural disasters like wildfires, floods, tornadoes and earthquakes can produce collateral risk.

The Federal Crop Insurance Program is another example of a public-private insurance partnership and an experiment in managing collateral risk. The Crop Insurance Program is managed through the USDA’s Risk Management Agency working with private insurers who do the underwriting and independent agents who sell the insurance.  Crop insurance is the oldest of these programs having its origins in the Dust Bowl and the Great Depression.  It began as a limited experimental program in the USDA that covered major crops in their main areas of production and it was operated strictly as a federal program.  The reason for creating a crop insurance program was to provide relief in an environment where localized disasters – like droughts – created pressure for declarations of emergencies and applications for federal assistance.  In short, it was an effort to manage risk at a national level.

The program as it is known today took shape in 1980 with the passage of the Federal Crop Insurance Act and evolved through the creation of the Risk Management Agency in 1994 as a means of administering the program.  Much of the impetus for the evolution of the law and the agency appears to have been the regular calls for disaster assistance to farmers following crop related events like drought and hailstorms.  Today, the Risk Management Agency administers the program and 17 insurers participate as underwriters.  The federal government provides a reinsurance capacity which puts the American taxpayer on the hook for catastrophic losses but they also participate in the profits; in most years there is an underwriting surplus.

Like other programs designed to respond to these collateral risk events there are supporters and detractors.  Detractors cite the huge, and potentially ballooning, costs of the program which is projected to reach about$16 billion this year following severe drought in many areas of the south and Midwest.  Supporters of the program note that without it, may farmers would be put out of business by seasonal losses leaving our national food security in peril.  

Historically, it appears true the program has best served large corporate farms.  It is only recently that programs have been developed to support small farmers and organic growers like those we find here on Washington’s Olympic Peninsula.  The problem for organic growers has been that reimbursement rates did not take into account the increase in value of an organic crop which significantly affected the value of the coverage. New programs are being developed to address that which allows high reimbursement rates.  Fruit growers, another Washington interest, are also not wholeheartedly in support of the program.  Not all crops are covered and there are bureaucratic hurdles to jump in order to create a successful application.  

Although there are a number of groups that would like to see reform or elimination of the program it has proven resistant to change by congress and remains a favorite among many farmers, particularly those involved in large farms and commodities.

Renting? – Insure Your Property

In 2006, an Insurance Research Council poll found that less than half of renters have a renter’s insurance policy; over 95 percent of homeowners had homeowners insurance.  The percentage of renters carrying renter’s insurance may have declined since then; a new survey commissioned by an online service found only 34 percent of American renters have renter’s insurance

Perhaps the recession has made some people more willing to accept the risk of loss rather than the certainty of a premium.  This may not be a good choice these days.  Independently, surveys by several insurance companies have shown that renter’s, on average, have a substantial exposure.    A study by USAA insurance suggests the average renter has more than $20,000 in possessions and a similar study by Allstate puts the total higher – at around $30,000. 

There may be several reasons why people don’t buy Washington renters insurance.  One reason may be the mistaken belief that their landlord’s insurance policy will cover their belongings in the event of a fire or theft.  Typically, that is not the case – a landlord is not generally responsible for the renter’s belongings and landlords are now increasingly even requiring tenants to buy their own renters insurance policy.  Another reason is the presumption that renter’s coverage is expensive.  This is born out through survey data that found 60 percent of respondents believed renter’s insurance would cost $250 a year or more; 21 percent guessed it would cost over $1,000.  In fact, renter’s insurance is very affordable and while it varies by state and by company, the Independent Insurance Agents & Brokers of America (IIAB), estimate the average cost for renter’s insurance is about $12 per month for $30,000 worth of property coverage and $100,000 of liability coverage. 

There are really good reasons to consider renter’s insurance.  The most important could be liability coverage – a visitor is injured in your home or their property is damaged or stolen.  Your renter’s insurance can help protect you in the event of a claim or suit.  If you have a theft, fire or other damage (excepting flood or earthquake damage), damage to your possessions should be covered.  It can also help in catastrophic situations like fire by providing support for an alternative living situation.  Renter’s insurance may even cover losses outside your home – like someone stealing your laptop while you’re out and about.  

Before purchasing a Washington renter’s insurance policy, do a careful home inventory. Go room to room and photograph and document the value of each item in the room. This will allow you to see exactly how much coverage you will need, and don’t be surprised if the value of what you own is higher than your gross estimate.  Finally, if you have high end items – fine art, antiques, jewelry or computers – make sure you can get adequate coverage.  If you are insuring through Homer Smith Insurance, we can help you with this.

Understanding Auto Costs of Ownership

According to the American Automobile Association, if you are an “average” sort of person and you drive 20,000 miles per year, your total auto ownership costs will be about 51.9 cents per mile or about $10,374 per year to own your vehicle; that’s a calculated average for a hypothetical low-risk driver with a good driving record who lives in a small city and commutes three to 10 miles a day to work.  Why, it could even be here.  Still using the same assumptions, your costs might be as low as $7900 if you drive a small sedan or as high as $13,000 for an SUV.  Understanding the components of auto ownership can help you make intelligent decisions about your car purchases and use.     

You can look at your annual automobile costs as the sum of a set of items that includes your direct operating costs for fuel, maintenance and tires and your indirect or “overhead” costs that are necessary to auto ownership – insurance, licensing, registration, taxes, finance charges and depreciation.  While most of us worry about the price of gasoline, in fact, the overhead costs of auto ownership outweigh the direct operating costs, usually by a lot.  In the AAA study, average gasoline costs came to about 14 and a half cents a mile ($.1445) or $2890 for the 20,000 miles of driving – a little under 30% of the $10,374 cost of ownership.  Adding maintenance and tire wear to the mix just tacks on another 6 cents or so, bringing the direct operating costs to $4085/years a fraction less than 40% of total costs. 

Obviously, these direct costs are something a driver has at least limited control over.  Choosing a car with higher gas mileage or finding the least expensive gas in your area will help bring down the cost per mile of gas and choosing to drive less often or less far will help reduce your annual costs.  Maintenance and tires are also a matter of shopping for the best prices you can find, though as a much smaller component of costs, savings here do not have as much effect on the total.  

Insurance is one component of overhead costs – about 11% of the total cost of ownership in our hypothetical example.  We are fortunate here on the Peninsula in Washington that our state ranks 43rd in the nation for costs of auto insurance and – if you read our blog regularly, you already know that strategies like bundling your home and auto insurance with the same carrier can lower your rates even more. With a little effort you should be able to beat the average. 

Finance charges are another substantial component of costs in the average costs of ownership and one that you may have some control over by choosing when you replace your car, its cost and shopping for your interest rate.  Taxes, license and registration fees are set by the state and except for your choice of a more or less expensive vehicle may be difficult to control.  

The big gorilla in auto costs is depreciation – the amount of value your car is losing as it ages over time.  Depreciation begins the minute you drive a car new or used, off the lot and continues.  The standard for car depreciation is that all cars, in general, lose about 15 to 20 percent of their value each year and that holds true for new or used cars. A two years old car will be worth about 80 to 85 percent of the value the car held as a one-year-old car; next year it will be worth 80 to 85 percent of its current value.  There’s a nice infographic at that illustrates this.  

The average deprecation in our AAA example was $3571 / per year, making this the single largest component in the costs of ownership at 33% per year of total ownership costs.  So, what can you do to mitigate the amount of depreciation? First, you can look at some of the variables that determine car depreciation.  Some automobile brands depreciate less than others – a fact you can understand by comparing the resale values of cars to their original selling price at different year assumptions.  The condition of a used car will affect its resale value, so the care you take to preserve the value in your car will help reduce your depreciation.  Finally, cars that are in low supply but have an intrinsic demand often have better resale values.  The problem here is that they may not be the best choice as a family car.  

If you want to calculate your personal cost of ownership, you can do that using the same method Triple A does.  Look through their pamphlet on the subject here.   

Most Expensive Cars to Insure

We were looking at Statistic Brain the other day – well, just because we like numbers.  They had a listing of the 10 most expensive cars to insure – on average.  That made us a bit curious – what was it about the following list of cars that seemed to make them more expensive to insure?  

  • Mercedes C63 AMG Coupe $5,532
  • Audi R8 Spyder Quattro $3,384
  • Mercedes-Benz CL600 $3,307
  • Mercedes-Benz S600 $2,948
  • Audi R8 4.2 Coupe $2,903
  • Porsche Panamera Turbo $2,738
  • BMW ActiveHybrid 7 $2,701
  • Porsche 911 Turbo / Convertible $2,674
  • Mercedes-Benz CL65 AMG $2,669
  • Mercedes-Benz CL63 AMG $2,615
  • Jaquar XKR Supercharged Convertible $2,585
  • Mercedes-Benz S63 AMG $2,542
  • Audi A8 L Quattro $2,513
  • BMW 750i $2,430

This listing was pretty much confirmed in an August article in Forbes magazine that has some pretty nice pictures to go with it.

We know that your Washington auto insurance premium is influenced by biological factors like age and gender and that it is also influenced by behavioral factors like driving record, length of commute or miles driven per year  and marital status.  Premiums can also be influenced by where a vehicle is garaged and the vehicle’s make and model. Now, how do you figure out an “average” rate if there are so many variables?  The answer comes from which used a “standard” to figure out average premium. The averages are based on a standard such as a 40-year-old male driver who commutes 12 miles to work, with policy limits of 100/300/50 and a $500 deductible on collision and comprehensive. This approach provides a fair comparison across companies. It also means that your premium, if you have one of these cars, may vary from this average number.

So, if we remove biological, behavioral and geographical variables and the insurance premiums are still different, how do we account for the difference?  The  car you drive is associated with a certain amount of risk so far as underwriters are concerned. Risk here In the eyes of an insurance carrier, increased risk means increased potential of payout. An underwriter’s task is to set the premium at a rate that will cover potential claims. If the car you choose is expected to be stolen more often, involved in accidents more often or has parts that are more costly to repair, you can expect a higher premium. The cars on the most expensive list are high-end sports cars. They may be associated with more serious injury in the event of crashes, even with the presence of safety equipment. Smaller and lighter cars don’t absorb the energy of a crash as well as larger cars. The vehicles start with a high price – some in the $100,000 range – so the risk of loss from theft would be a great concern. These vehicles also all have the probability of high costs of repair for even relatively minor damage. Finally, the class of vehicle itself interest into the equation. Mom’s minivan may not corner so well, accelerate as fast or stop as quickly but history suggests that it also will not be driven fast or recklessly. This may not be the case with a vehicle with an engine powerful enough to drive a small plane and fast enough to out run one.

If you are going to buy one of these top ten’s, don’t worry about getting a red one.  The notion that red cars cost more to insure is pretty much just an urban legend.

Sandy, Global Warming and the Peninsula

Floods are the most common natural disaster in the United States and over 5 million households have flood insurance through the National Flood Insurance Program. National Flood Insurance Program statistics suggest that 25 percent of flood claims come from people in low- or moderate-risk areas and in 2011 New Jersey, New York and Pennsylvania were the top three states for these claims.  With hurricane Sandy creating a huge number of claims, we can expect a similar ranking for 2012.

Hurricane Sandy that hit the east coast at the end of 2012 has opened a number of questions that are of importance to folks here on the Peninsula. First, there are questions about the contribution to Sandy’s devastation made by global warming and rising sea levels.  Second is whether the National Flood Insurance Program is a good idea for taxpayers – and perhaps by extension, while it is available should you consider it.  These questions are of great interest to those of us who live here because there are significant parts of the Peninsula that are exposed no to the potential for flooding and, with the continuation of rising sea levels, the number of exposed areas will rise significantly.

At present, for example, downtown Port Townsend is in a special high risk flood area and premiums for flood insurance are a multiple of costs for downtown Sequim which is in a moderate risk area.  Changes in the sea level in Puget Sound could add new areas to the high risk category and create other issues as well.  A report by the State Department of Ecology identified the following problems arising from rising sea levels:  

* coastal community flooding
* coastal erosion and landslides
* seawater well intrusion, and
* Lost wetlands and estuaries.

Certainly Port Townsend downtown and parts of Port Angeles would face serious risk of flooding with a rising sea level.  A number of our coastal residential areas here are situated on bluffs that could be adversely affected by erosion and landslides.  Shell fishing and our local shellfish industry could be severely compromised if the sea levels rose sufficiently and likely no one knows at present what the impact of rising sea levels might be on the Hood Canal. 

While here in Washington we don’t typically have the same types of storms as the hurricanes that affect the east and gulf coasts, we do have serious storms.  King Tides which happen regularly here could be compounded by rising sea levels and high winds in a disaster scenario as anyone who has walked area beaches recently might be able to testify.  . 

As politicians and ordinary taxpayers are looking at the record of the National Flood Insurance Program, there is some concern that we may be encouraging risk taking behavior where it should not exist.  The national program came into existence in the late 1960’s when insurers became increasingly unwilling to underwrite flood insurance.  While the program has helped to spread the risk over a wider pool of people, it has also had the effect of allowing people to build or remain in high risk areas without fully accepting the risk.  At present, the National Flood Insurance Program is trying to recover from the deficit caused by floods in 2005; Sandy is likely to add greatly to that deficit.  We will have to watch in coming years whether the federal government will continue to support the program and, if so, whether premiums will remain affordable as they rebuild reserves. 

Insuring Guns in Schools

A couple of months ago we did a blog piece on gun liability insurance and noted that the insurance industry might have something to add to the gun control issue with a distinctly American private industry twist.   It turns out we might have been on to something.  Kansas passed a law earlier this year to allow teachers and other school officials to carry concealed weapons.  It was not long after that law passed that the news broke an insurance company that insured a large percentage of Kansas Schools had indicated it would not insure or renew insurance on any school that allowed teachers or staff to carry guns on school property.  

Just in case anyone thinks this was a political decision, it turns out that the insurance carrier had always had an underwriting guideline for schools that required any on-site armed security be provided by qualified law enforcement officers.  They did not change the guidelines to respond to any contemporary concerns about gun control.  The company noted that while they respect any schools decision about how to protect the safety of students concealed handguns in schools create a greater liability risk and they needed to protect the financial interests of their company.  Not long after the announcement, several other insurers indicated they would institute the same guidelines. 

In short, while lawmakers were passing laws they believed might make people safer in schools, insurers were saying “not so fast.”  The risk experts looked at the prospect of untrained people carrying guns in schools and declared that practice too risky to insure.  That may not be surprising on the face of it.  Insurers need to pay attention to the risks that affect them and they can be very sensitive to those risks.  For example, your Washington homeowner’s insurance carrier may be concerned about what kind of dog you have.  There are somewhere over 15,000 liability claims for dog bite every year and over $475 million paid out annually.  It is just prudent to make an underwriting decision to either deny coverage or increase premiums for people who have “dangerous” dogs.  Presently your homeowners insurance is likely to provide coverage in the event of an accidental death.  There may be only 500 to 600 of these per year, but if the incidence of accidental deaths increases, it could easily reach a threshold where insurers are curious about how many and what type of guns there are in the home.   

The direction for gun liability is not always clear however.  While the decision in Kansas made headlines, other states have found willing carriers – and sometimes even savings.  A New York Times article offers a fairly even handed treatment of the issue.  While noting the difficulties in some states, they also suggest that other states and individual school districts may be able to find willing carriers rather easily.  Their conclusion is that the market will take care of the issue.  That means, effectively, that if the underwriters see no increase in liability claims, the whole issue of school staff carrying guns could become moot from a business perspective.  That may have little or no effect on the efforts to involve insurers in the gun debate in the longer run. 

Risky Business

All work and no play make Jack a dull boy, according to the old saying. However, if you play the wrong way, play can make a big dent in your pocketbook.  Life insurance companies and, until a full implementation of Obamacare, health insurers offering individual health policies see a lot of risk related implications in your choice of work or personal hobbies.  It isn’t that insurance companies pass any moral judgments on what you do with your spare time; it’s just that some of your choices can put you at greater risk for death or accident and those risks get accounted for in the amount of premium that you pay.

A recent US News article looked into some of the more adventurous pastimes and concluded that your participation can cost you real money.  For example, they note the experience of a young executive who had left a position where he had company life insurance and applied for individual life. He applied for life insurance from a company that had a listed rate of $20 a month for $350,000 of term life insurance and indicated in his application that his hobbies included rock climbing and mountain climbing.  His application was accepted, but his rated premium was $180 a month. 

From an underwriting perspective there is a huge difference between underwriting an individual life insurance policy or health insurance policy and underwriting a group. When underwriting a group, you can generally assume that with sufficient numbers and sufficient time, claims experience will be reasonably predictable. At the individual level, you have to look carefully at how an individual’s behaviors may affect their risk.  If you are a scuba diver, for instance, you could be the most careful, best trained and equipped diver in history, but from the underwriter’s perspective you are a member of a group that experience about 1 death for every 200,000 dives.  Statistically speaking, you have an increased risk of death. 

Some other hobbies can also impact your premiums – and in some cases even your ability to purchase individual insurance.  Motorcycle riding is a popular but, dangerous hobby with higher fatality rates from accidents than motor vehicle accidents in general; recreational boating is another popular area that may raise your risk and premiums.  The biggest hits come, though, when you leave solid ground.  As in the story of the rock climbing executive, the hobbies your insurer hates include mountain climbing, sky-diving, hang gliding and being a civilian pilot.  

It is not just your hobbies that can affect your premiums, but your occupation as well.  Group life insurance through your job provides the opportunity to underwrite a whole professional group, but in applying for an individual policy, your job could have underwriting implications.  Miners, lumbermen, and offshore fisherman may be rated at increased risk.  Construction workers who work high steel or heavy construction are at increased risk; home construction and general construction are more likely not.  Private and commercial pilots will typically be rated as high risk while most police officers and firefighters will not be considered high risk unless they are involved in special risk category – like a bomb squad.

In some cases it is possible to seek an exclusion from a special category of risk and reduce your premiums.  For example, a life insurance could be written to exclude coverage of death from activities related to hang gliding.  That may allow coverage to be underwritten or the premium reduced.

Lessons from Terrorism Insurance

“Well, it couldn’t happen here” was getting a pretty good foothold in this area.  We were beginning to forget about the apprehension of Ahmed Ressam by U.S. Customs officials in Port Angeles, Washington in 1999, and it was pretty much quiet as several potential incidents were thwarted by the FBI.  Then, along comes an incident like the Boston Marathon bombing to remind you that terrorism can happen anywhere. 

Past the human tragedy of terror, there is an economic aftermath that emanates from the incident like ripples on a pond.  Most immediately, the victims need care.  The dead are buried and the injured are treated.  In the case of the Boston Marathon bombing, many of the injuries are not only severe, but they will change the lives of the injured.  Amputations require immediate care, rehabilitation and then ongoing attention.  While we know already that several victims did not have insurance, informed sources are speculating that the care costs for those that do have insurance may exceed their coverage limits.

The business implications ripple out from there.  On the short term, businesses in the area of the bombing may have damage that needs to be addressed immediately and business interruption implications that can last longer.  In Boston, for example, the area around the crime scene has remained largely closed for eight days following the incident and the implications for the area have yet to be determined – will people gravitate to the area out of interest or avoid it out of concern for the associations.  There are estimates as many as 70% of businesses in urban areas may have terrorism insurance; those who do may be able to weather the interruption more easily.

After 9/11 –at over $32 billion the largest payout in the history of insurance until Hurricane Katrina in 2005 – the US enacted the Terrorism Risk Insurance Act which made the federal government an insurer of last resort in terrorism incidents.

Going forward, it hardly seems likely that lots of businesses in Port Townsend, Sequim and Port Angeles will be rushing out to buy terrorism insurance – at Homer Smith Insurance we don’t get many calls from people inquiring about it.  Even in our closest brush with terrorism to date, it appears the terrorist was just passing through on the way to larger targets far from here.

Nevertheless it is both true that terror incidents can occur anywhere and that these incidents give us an opportunity to reflect on how we would manage our own homes, lives and businesses in the midst of a major emergency.  There is plenty of overlap from a claims and business interruption perspective to make an event like the Patriot’s Day bombing a worthwhile opportunity for business owners or managers to spend some time reflecting on the impact of a disaster on their business and the steps – insurance being only one – that might be taken to mitigate the impact of disaster on their business and their lives.