TERRORISM INSURANCE

Following the terrorist strike against the World Trade Center in New York, President Bush signed into law the Terrorism Risk Insurance Act, which requires that insurance companies offer insurance against damage caused by terrorism. Boards of directors may, but are not required to purchase such insurance for their associations. It seems unlikely that community associations would be high on the target list of terrorists. Even so, if the association were located near a high-value target (such as San Francisco's financial district, Los Angeles International Airport, the Port of Long Beach, etc.) where it could suffer collateral damage.

As with earthquake insurance (where the probability of an earthquake in California is high), each association must decide for itself whether the probability of a terrorist strike and resulting damage to their association is high enough to justify the premiums for a terrorism policy. Boards should ask the association's insurance broker about the cost of such insurance, about exclusions in the policy (there are many) and whether their association is located near any known high-value targets.

Updated by ADAMS KESSLER 1/21/2008