Current as at 24 February 2015

Executive Summary

The Sydney siege at the Lindt Café (the Siege) has been declared a terrorist incident for the purposes of the Terrorism Insurance Act 2003 (Cth) (TIA).

Insurers, brokers and insureds all need to be clear on whether their policy and any claim made under it is affected.

The effect of the TIA is that a terrorism exclusion term won’t have any effect where:

  • The Treasurer declares the incident a “terrorism incident” – this has happened.
  • The policy is an “eligible insurance contract” – this needs to be determined; and
  • The loss or liability claimed for is an “eligible terrorism loss” – this needs to be determined.


On Thursday 15 January 2015 The Honourable Joe Hockey MP declared the Siege a “terrorism incident” under section 6 of the TIA.

The effect this is that under section 8 of the TIA, a “terrorism exclusion” in an “eligible insurance contract” has no effect in relation to a loss or liability to the extent to which the loss or liability is an “eligible terrorism loss”.

We discuss each key concept below.

What is a Terrorism Exclusion?

Section 8 of the TIA provides that a “terrorism exclusion” means an exclusion or exception (however described) for:

  • acts that are described using the words “terrorism” or “terrorist” or words of similar effect; or
  • other words (however described) that are substantially similar to terrorist acts as defined in section 100.1 of the Criminal Code Act 1995 ie:.

an act done or threat made with the intention of advancing a political, religious or ideological cause and with the intention of coercing or intimidating a Commonwealth, state or territory government, a foreign country, the public or a section of the public. Furthermore, it must:

  • cause death or serious physical harm to a person;
  • cause serious damage to property;
  • endanger another’s life or create a serious risk to public health or safety; or
  • seriously interfere with, disrupt or destroy an electronic system such as a telecommunications system, transport system or essential public utility.

What is an Eligible Insurance Contract?

Only terrorism exclusion clauses in “eligible insurance contracts” are affected.

Under section 7 of the TIA an insurance contract is an “eligible insurance contract”:

  • if it was in force on, or incepted after, July 1 2003;
  • if it is not otherwise excluded under the TIA (see below); and
  • to the extent it provides cover for one or more of the following:
    • loss of, or damage to “eligible property” that is owned by the insured;
    • business interruption and consequential loss arising from:
      • loss of, or damage to, eligible property that is owned or occupied by the insured;
      • inability to use eligible property, or part of eligible property, that is owned or occupied by the insured;
      • liability of the insured that arises out of the insured being the owner or occupier of eligible property.

What insurance contracts are excluded from being an Eligible Insurance Contract?

Section 7 of the Terrorism Insurance Act and Schedule 1 of the Terrorism Insurance Regulations 2003 specify contracts of insurance that are not “eligible insurance contracts” for the purposes of the Act.

The following are some of the exclusions:

  • reinsurance;
  • domestic home and contents insurance, travel insurance, sickness and accident insurance, consumer credit insurance, pleasure craft insurance, bloodstock insurance, motor vehicle insurance and insurance covering personal or domestic property;
  • farm insurance that provides cover for producing crops or livestock, including produce derived from the crops or livestock or the interests of an owner, lessor, lessee or hirer of property used to produce crops or livestock (excluding business interruption):
  • trade credit insurance, salary continuance insurance, employment practices liability insurance, machinery breakdown insurance and home-owners warranty insurance;
  • professional indemnity, directors’ and officers’ and trustees’ liability insurance and bankers’ blanket bond insurance, computer crime insurance and fidelity insurance;
  • product liability insurance (excluding the public liability component);
  • marine and aviation insurance;
  • workers’ compensation insurance and CTP;
  • insurance underwritten by the Commonwealth, state or territories;
  • health insurance, life insurance and superannuation contracts;
  • a contract that includes provisions of insurance, although the contract would not ordinarily be regarded as a contract of insurance.

What is Eligible Property?

For policies not excluded, “Eligible property” is defined under section 3 of the TIA to mean the following property that is located in Australia:

  • buildings (including fixtures) or other structures or works on, in or under land;
  • tangible property that is located in, or on, eligible property;
  • any other property prescribed by the regulations (tangible property that is on, in or under the seabed is prescribed).

Roads, tunnels, dams and pipelines are examples of eligible property.

What is an Eligible Terrorism Loss?

Section 3 of the Terrorism Insurance Act defines an “eligible terrorism loss” as a loss or liability arising from a “terrorist incident” declared as such by the Treasurer.

However, it does not cover:

  • loss or liability arising from the hazardous properties (including radioactive, toxic or explosive properties) of nuclear fuel, nuclear material or nuclear waste; and
  • any act that the Treasurer believes is an act of war.

The incident must occur in Australia, including the territories of Christmas Island and Cocos (Keeling) Islands and the coastal sea.

To be declared as a terrorist incident, the incident must also fall within the definition of a “terrorist act” (See above).

The Honourable Joe Hockey MP found that the Siege met the definition of a “terrorist act” as it was an act with the intention of advancing a political, religious or ideological cause.

What is the end result?

If caught the insurer cannot rely on the terrorism exclusion to the extent specified above to refuse to pay the claim.




This document is designed to provide helpful general guidance on some key issues relevant to this topic. It should not be relied on as legal advice. It does not cover everything that may be relevant to you and does not take into account your particular circumstances. It is only current as at the date of release. You must ensure that you seek appropriate professional advice in relation to this topic as well as to the currency, accuracy and relevance of this material for you.


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