Remember those unlucky school days when your teacher proudly announced, “All right class, time for a pop quiz.”? Just the thought of that makes me cringe. Well guess what, I’m now going to do the same thing to you…sort of. Are you nervous? You shouldn’t be. I’m not in a position to grade your answer, so you can breathe a sigh of relief.

OK, here goes. How many U.S. territories are there? Are you scratching your head at the thought of trying to determine that number…or at the fact I’m asking this and I should be talking about insurance? That’s a coin toss, I’m sure.

The answer is this — there are 16 territories (15 unincorporated and 1 incorporated) of the United States. Only five are inhabited (Guam, Puerto Rico, Northern Marianas, United States Virgin Islands, and American Samoa). The only incorporated territory is the Palmyra Atoll. All current territories are considered Insular Possessions. That’s a nifty phrase for the fact they’re islands.

The point of me bringing this up is, believe it or not, I get a lot of questions on U.S. territories and whether they’re covered by U.S. insurance policies. You’ll understand why there are so many questions as you keep reading. It’s a tough topic to get a handle on.

Territories by Definition

What’s an unincorporated territory? It’s an area controlled by the U.S. Government which isn’t part of the U.S. The U.S. Constitution applies only to fundamental “organic” rights (i.e. life, liberty, and the pursuit of happiness) with other constitutional rights applied based on acts of the U.S. Congress and local traditions and law. Not all of the residents of U.S. territories have the right to vote in the U.S. presidential election. Citizens of Guam and Puerto Rico are U.S. citizens, but the residents of American Samoa are U.S. nationals (not citizens). Each of the inhabited U.S. territories is its own nation and is self-governed. Clear as mud? I know…it’s tricky.

Insurance Implications

So what does this mean for your insurance? Well, a typical liability insurance policy will define coverage territory as the United States of America, its territories and possessions, Puerto Rico, and Canada. Further definition of territories isn’t given, but it’s clear that places like Guam and American Samoa would be territories of the U.S. Is the mud getting clearer or thicker?

Now you may be thinking, “Territories are covered then, right?” My answer is this, “Yes, on a de facto basis (“in practice but not necessarily ordained by law”).” Most insurance carriers don’t have available resources like claims adjusters, third-party administrators, and legal counsel in all territories. Relying on de facto policy wording is risky at best.

Now add into the mix military installations. Those installations outside the territory of the U.S. aren’t considered part of the U.S. Dominion from an insurance perspective. Places like The Marshall Islands, The Federation of Micronesia, and Palau are independent sovereign countries that have a Compact of Free Association (COFA) with the U.S. What this means is that U.S.-based insurance policies clearly don’t grant coverage for these countries.

Advice for Travelers

So what should you do if you have business-traveling employees or you’re a traveler yourself and you’re heading to a U.S. territory? Without a doubt, check with your insurance broker or consultant and insurance carrier to see what kind of policy you/your business have in place and ensure the coverage for U.S. territories is there and sufficient. As you can see by my explanation above (you probably had to read it a few times…I know I did), this isn’t an easy topic to understand and leaving coverage to chance isn’t a good idea.

You can also reach out to us at Holmes Murphy. We can answer any questions you may have and even review your policy to make sure the only thing you need to worry about when traveling is that you pack enough sunscreen. Feel free to call or email at any time!