March 25, 2004 

Dear Mr. B: 

This letter is in response to your request for an interpretation under the Terrorism

Risk Insurance Act of 2002 (the “Act”)1

 and Treasury’s regulations implementing the Act 

to the Terrorism Risk Insurance Act Endorsement to your excess workers’ compensation 

policies.2

 Specifically, you ask whether your company’s liability under the Act would be 

limited by Section 103(e)(2)(A)(ii) in the event an act of war is certified as an act of 

terrorism for purposes of workers’ compensation losses. In our view, Section 

103(e)(2)(A)(ii) of the Act would apply and thus would limit Employers Insurance 

Company’s (EIC’s) liability for insured losses under Part One coverage provided by the 

policies identified below. 

Background 

EIC provides excess insurance coverage to self-insured companies and selfinsured groups. These excess policies are not traditional workers’ compensation 

insurance policies. Instead, these are stop loss-type policies issued to employers to cover 

the employers’ excess losses above a certain retention point for employee liability 

exposures, including liabilities under their self-funded workers’ compensation programs. 

EIC provides this coverage through three policy forms (hereinafter “the Policies”).3

 

Coverage under Part One of the Policies applies to losses paid by employers because of

liability imposed upon the employers by state workers’ compensations laws. Part Two of 

the Policies applies to other, non-workers’ compensation, employer liabilities resulting 

from employee injuries.

Acts of War Certified as Acts of Terrorism 

Section 103(e)(2)(A) of the Act provides, in part, that if the aggregate insured 

losses under the Act exceed $100 billion during a Program Year, no insurer that has met 

its insurer deductible is liable for the payment of any portion of that amount that exceeds 

$100 billion. 

 1

 Public Law 107-297, 116 Stat. 2322, 15 U.S.C. §6701, note. 

2 This response is being issued pursuant to 31 C.F.R. §50.9, which sets forth a procedure whereby

persons actually or potentially affected by the Act or regulations may request an interpretation. 

3

 The EIC policies are titled: (1) Specific Excess & Aggregate Excess Workers’ Compensation and 

Employers Liability Indemnity Policy; (2) Aggregate Excess Workers’ Compensation and Employers

Liability Indemnity Policy; and (3) Specific Excess Workers’ Compensation and Employers Liability 

Indemnity Policy. 

1
“Insured loss” is defined in Section 102(5) of the Act as “any loss resulting from

an act of terrorism (including an act of war, in the case of workers’ compensation) that is 

covered by primary or excess property and casualty insurance issued by an insurer if such 

loss ...” occurs within the United States, or to certain air carriers or vessels, or at the 

premises of a U.S. mission. Under Section 102(1)(B) of the Act, the Secretary of the 

Treasury cannot certify an act as an “act of terrorism” if the act is committed as part of 

the course of a war declared by the Congress.4

 This limitation, however, does not apply 

“with respect to any coverage for workers’ compensation.”

5

 

Conclusion 

In Treasury’s view, coverage under Part One of the Policies issued by EIC 

qualifies as coverage for workers’ compensation losses, notwithstanding that the Policies 

are excess liability policies rather than traditional workers’ compensation policies. 

Accordingly, in the event that an act of war is certified by the Secretary as an act of 

terrorism for purposes of workers’ compensation, Section 103(e)(2)(A)(ii) of the Act 

would limit EIC’s liabilities under Part One of the Policies if the aggregate insured losses 

exceed $100 billion during a Program Year and EIC has met its insurer deductible. 

Thank you for your inquiry. For additional information or if you have any 

specific questions, please call the Program office at 202-622-6770. 

* * * 

This response addresses the application of the Act and regulations to the specific 

situation set forth in your request, as you have represented the facts to Treasury. If there 

is a change in any of the facts or assumptions presented, and such facts or assumptions 

are material to a conclusion presented in this response, then the requestor may not rely on 

that conclusion generally or as support for any proposed or subsequent activity. This 

response is provided by the Terrorism Risk Insurance Program as a means of stating its 

current interpretation of the Act and regulations. The Program may revise or revoke this 

interpretation upon its own initiative or upon the enactment of amendments to the Act or 

regulations. 

Sincerely, 

Jeffrey S. Bragg 

Executive Directo 

 4 See generally 68 FR 41250, 41252 (Jul. 11, 2003). 

5

 Emphasis supplied. 

2