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Exclusion Of Terrorist-Related Harms From Insurance Coverage: Do The Costs Justify The Benefits, Jeffrey E. Thomas

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The September 11 attack was the largest single insured event in history. In the end, insurance companies are expected to pay approximately $50 billion to victims of the attack. In response to the perceived potential of future terrorist losses, many insurers have begun to exclude terrorist-related losses from their policies. In light of the size and uncertainty of future losses, this is understandable. In adopting this approach, however, it appears that little thought has been given to the transaction costs associated with the exclusion. One of the significant contributions of Law and Economics to legal literature has been to illuminate …