By Albert B. Crenshaw

Small businesses and their insurers are venturing into uncharted territory in the wake of the terrorist attacks on New York and the Pentagon.

Not only did the airborne attacks cause direct physical damage, they also prompted police, military and other authorities to impose wide-ranging restrictions on streets, airports and travel. Some of those have yet to be lifted.

There is such a thing as "business interruption" insurance, also known as business income insurance, which is meant to cover situations in which a business is shut down. The good news is that this sort of coverage is now part of many standard business owners' policies, so more businesses are likely to have it than in the past.

As with all insurance, there are situations that are not covered, such as floods, nuclear hazards and earthquakes. But in this case, many of the situations were not ever contemplated, so it is unclear whether they are covered.

"You can imagine dozens of fact patterns that have never been tested or explored before," said Eric M. Goldberg, assistant general counsel at the American Insurance Association, a property insurance trade association.

For example, policies generally cover direct damage, but exclude indirect damage.

If a terrorist attack "shuts the financial markets [in New York] and a stock broker in San Francisco is unable to make trades, would coverage be available? I don't think that's ever been tested," Goldberg said.

The situation at Reagan National Airport has similar uncertainties. Policies often cover cases where a business is closed by action of civil authorities. What happens if, as at National, the government closes off the source of virtually all customers -- flight operations -- but technically leaves the business open?

The last businesses at National stopped operating Wednesday, and late Friday officials padlocked most of the buildings and turned up the thermostat. Only Terminal A remained open to house a temporary unemployment office.

Some airport business owners said their insurance agents were not returning their calls. That is probably because the agents do not know what to tell their clients -- and will not know until the insurers figure out what they are going to do.

Business owner Melton McGuire said his airport restaurant, Virginia Beverage Co., was forced to close Sept. 11 after federal authorities grounded all flights. Insurers might not cover his losses because there was no physical damage to the restaurant, he said.

"The interesting part about the issue is that it revolves around an unintentional loophole that exists because nobody contemplated the type of event that happened on 9/11," he wrote in an e-mail. "This keeps people from collecting business interruption insurance and other damages from distant, perhaps unrelated events."

Under his policy, McGuire said, if insurers decide business interruption insurance does not cover him, he will likely have two weeks worth of losses covered by insurance through other means. But if the airport remains closed for a month or more, he will likely have to lay off employees. "It would be a disaster for us," he said.

If a business's coverage is triggered, it can be quite helpful. It can cover things such as lost revenue for a period of months and, where applicable, the extra expense of setting up operations somewhere else.

Insurance industry officials say they intend to pay promptly.

"Business interruption claims will be among the first to be submitted and paid," said Donald Griffin of the National Association of Independent Insurers, another trade group. "Moreover, payments for many of these losses will continue for months to come. This is one of the most important ways insurers can help businesses get back on their feet after this terrible tragedy."

How many of the small businesses affected by the attack will survive is unknown at this point, but history does not paint an optimistic picture.

After the previous attack on the World Trade Center, 150 of about 300 small businesses affected never recovered and eventually folded, according to the Insurance Information Institute.





The Internal Revenue Service last week set up an electronic mailbox to provide assistance and answers to business taxpayers affected by the attacks. Businesses can send their questions to corp.disaster.relief@irs.gov.

The e-mail address was established to respond to questions businesses might have that were not addressed in various notices the agency has sent out to explain the extensions and other tax relief available to those affected by the attacks. The information available at www.irs.gov.





In the same vein, Senate Small Business and Entrepreneurship Committee Chairman John F. Kerry (D-Mass.) reminded reservists called to duty that they may be eligible for financial relief available through the Veterans Entrepreneurship and Small Business Development Act.

The law, pushed by Kerry in 1999 when reservists were called to active duty in Kosovo, gives them access to low-interest disaster loans designed to keep a business afloat and the right to defer payments on Small Business Administration loans. Also, the reservist -- or the person left in charge when the reservist goes -- can get counseling and training through the SBA.

Call the SBA or consult the agency's Web site, www.sba.gov, Kerry's office says.





The terrorist attack came just as optimism among small-business owners was turning up, according to the monthly survey by the National Federation of Independent Business.

NFIB's index of business optimism gained three points in August, with eight of its 10 components up and the other two unchanged. Hiring plans were up, capital spending plans were up and more business owners are expecting conditions to improve. Even the labor market remained tight -- a good sign for the economy, though not necessarily one that business owners applaud.

How businesses will feel in the months to come is unknown. The crushing effect of the terrorist attack that has swept the travel and lodging sectors is spreading gloom to other industry sectors.

On the other hand, there already was a considerable amount of economic stimulus under way, including drastic interest-rate cuts by the Federal Reserve. The White House and Congress now appear prepared to spend the surplus and more if necessary to defeat the terrorists, which adds to the potential boost to the economy. All that is likely to help eventually, and business owners can only hope that a recovery kicks in before their enterprise kicks the bucket.

Staff writer Sara Kehaulani Goo contributed to this report.