Colleges Urge Congress to Extend Terrorism-Insurance Law.

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Author: Blumenstyk, Goldie

Dateline: WASHINGTON

WITH CONGRESS about to renew a law meant to keep terrorism insurance affordable, colleges are among those urging lawmakers to retain a measure in the existing law for insurance against lawsuits.

Without the measure, colleges worry that their costs for such liability insurance could rise substantially or that the only policies available would carry such low limits that they would be of little help. At worst, colleges fear, they could find themselves paying a lot more for insurance and receiving a lot less coverage.

Colleges, which are considered vulnerable to terrorist attacks because they are open environments and often play host to mass gatherings, "would be particularly affected" if the measure covering general liability insurance were dropped, said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, which last week was writing a letter to Congress urging action on the law. "We're soft targets."

At issue is the Terrorism Risk Insurance Act, adopted in 2002 and set to expire at the end of this year. The law requires insurers to offer coverage in the event of an attack by foreign terrorists for property losses, for the costs of workers' compensation claims, and for general liability. In exchange, the government pledges to cover insurers' costs for losses above certain amounts. Colleges and businesses rely on general liability insurance to cover them against claims made in lawsuits.

The Bush administration has endorsed a scaled-down extension of the law for two more years, but wants to exclude general liability insurance from it. Committees in both chambers of Congress are now considering proposals, and groups like the American Council on Education and United Educators Insurance, a major insurer of colleges, have been pressing lawmakers to keep general liability insurance in the law.

An agreement on legislation could be imminent. The Senate Banking Committee and the House Financial Services Committee are pushing to adopt their own bills before Thanksgiving, so that the full House of Representatives and Senate can vote before the December recess.

The Terrorism Risk Insurance Act was adopted for only three years because Congress saw it as a temporary measure, to give the insurance industry time to figure out its pricing models for terrorism insurance in the aftermath of the September 11, 2001, attacks, said Janice M. Abraham, president and chief executive officer of United Educators.

But "it's really tricky to price terrorism" risks, Ms. Abraham said. Without the government's backstop, she said, colleges will find it difficult to obtain terrorism insurance.

"We don't want to be Chicken Little," Ms. Abraham said. "But there are going to be dramatic differences if the government doesn't play a role." She said the measure is especially important to smaller insurance companies like hers because they otherwise could not compete against large, multinational insurance companies. United Educators provides insurance to more than 1,100 member colleges, schools, and related organizations.

United Educators estimates that, without the federal prop, premiums would increase by between 10 percent and 100 percent, depending on a college's location and the activities it holds. For colleges, that could mean extra costs of $750,000 to $1-million for an initial $25-million of liability protection. Many universities buy insurance for much higher limits, Ms. Abraham said.

Another option would be to offer policies with very low limits of coverage, but as United Educators noted in a letter it is circulating to members of Congress, "that solution would be essentially useless to the institutions."

The letter also warns that, without the insurance, some universities might choose to discontinue mass gatherings, limit cutting-edge research on dangerous substances, and curtail the kind of open political discourse that sometimes sparks dissent or confrontation. "In 'hardening' themselves as targets," the letter says, "they would diminish their contributions to American society."

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By Goldie Blumenstyk