Damage To Boston Businesses May Not Be Covered By Insurance

Businesses around Copley Square are hoping the Boston Marathon bombings won't be officially declared an act of terrorism. That's because they stand to lose insurance money. Many have business interruption insurance to pay for lost income — but that doesn't apply to terrorism and few businesses pay extra to cover it.

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In Boston, the last of the businesses closed by the marathon bombing will be up and running by tomorrow night. Many of them on Boylston Street were closed for more than a week at great expense. To make matters more difficult, insurance might not cover that lost business - that is, if the federal government officially declares the bombing an act of terrorism.

From member station WBUR in Boston, Curt Nickisch reports.

CURT NICKISCH, BYLINE: Today, business is bustling at Marathon Sports on Boylston Street, right at the marathon finish line. People are buying running gear and making donations to the victims. It was right out front last week that the first of the two bombs exploded. Owner Colin Peddie saw his store turn into a crime scene.

COLIN PEDDIE: The last thing on my mind was the loss of business. You know, not until today have I really thought about the commerce side of it.

NICKISCH: But the commerce side is big. Marathon Sports was closed for more than a week, a major one at that.

PEDDIE: It's been significant. The four or five days after the marathon are in the top 10 business days of the year for us.

NICKISCH: But at least Peddie's inventory didn't go bad. That's what happened at Abe and Louie's, a steakhouse by the second explosion. Manager Tim Fannin says everything had to go.

TIM FANNIN: You know, I've opened a few new restaurants and this is about as close as it feels to it, you know, a bunch of whirring of refrigerators and you don't see any food around.

NICKISCH: Businesses tend to buy insurance for unplanned events like this. But after 9/11, Congress passed a law to exclude terrorism from the standard business interruption insurance contract. You have to pay extra, and most small companies don't. That means if the federal government officially declares the bombings terrorism, many businesses are going to be on the hook.

MEG MAINZER-COHEN: The costs associated with having a business continued, but the revenue was eliminated.

NICKISCH: Meg Mainzer-Cohen is the head of the Back Bay Association representing area businesses. She has been working with the city and state regulators to twist the arms of insurance companies to be generous even if the damages are not supposed to be covered.

MAINZER-COHEN: It is my goal to let no business close because of the situation.

NICKISCH: But why should insurance companies pay when it's not their responsibility, asks Bob Hartwig, the president of the Insurance Information Institute. He says the federal law passed in 2002 requires providers to offer every business the option of buying terrorism insurance.

BOB HARTWIG: It is very important to recognize that each and every business that does not have the coverage made a conscious decision to not buy that coverage. They have to decline the coverage.

NICKISCH: Hartwig says insurance companies are worried about setting a precedent and that means Tony Caz would be out a huge chunk of change.

TONY CASTAGNOZZI: Around $80,000.

NICKISCH: Caz is the co-owner of the Rattlesnake Bar on Boylston Street. After the bombs went off, no one stopped to pay their tabs. The Rattlesnake did not buy terrorism insurance, which would have cost about nine grand per year. On the pending federal designation, Caz says he's preparing for bad news.

CASTAGNOZZI: I would think it is an act of terrorism. Hopefully, the insurance companies, they might give us a break. I don't know. We'll have to see.

NICKISCH: Insurance is sometimes called the cost of doing business. For many around the site of the Boston Marathon bombings, they may have to pay for not buying terrorism insurance with the cost of not doing business. For NPR News, I'm Curt Nickisch in Boston.

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