PEOPLE who have no terrorism insurance cover may not get compensation from losses incurred at Westgate as insurers may apply the proximate cause principle, it has emerged.
This means, for instance, that if a car was insured against theft or fire even if it gets damaged while parked at the ill fated mall through an inferno or gets stolen out of the confusion arising from the attack, the owner may not be eligible for any payout from his insurance company.
This is what insurance industry terms as the proximate cause principle which simply means the cause having the most significant impact in bringing about the loss under a first-party property insurance policy, when two or more independent perils operate at the same time.
"If you did not have a cover against terrorism, whatever your damaged property is, it certainly has no insurance in this situation," Association of Kenya Insurers executive director Tom Gichuhi told the Star yesterday adding that its determination is a complex issue.
While this is the second major terror attack to befall the country after the 1998 bombing of the US embassy located in Nairobi's central business district then, terrorism and political risk covers are a fairly new concept in the local market with minimal uptake.
Insurance has a low market penetration with most people preferring to buy cover for the mandatory motor insurance or for what they see as the most likely risks to occur such as fire, theft or damage arising from civil strikes and commotion.
"If for instance your vehicle gets burned down while there, what was the cause of that fire that burned your vehicle? If what caused it is a terrorist attack....you are as good as having no cover if you did not insure against terrorism," Gichuhi explained.
Insurance agent Joakim Obulukhu said the cover which is sold as an extension to other main covers like fire is a hard-sell to many individuals and is usually taken up by organisations.
"When you tell people to add a little bit extra money as premiums to buy for them an all inclusive cover, they are usually very reluctant to do so," Obulukhu said.
APA Insurance, one of the main underwriters of this class of insurance did not respond to our requests for comment on this matter by the time of going to press yesterday. Determining an "efficient" proximate cause was the source of many claim disputes that arose after the 9/11 terror attack in the US.