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SACRAMENTO — The insurance industry’s attempts to limit its liability for future acts of terror were rejected Tuesday by California’s insurance regulator, though they have been approved by 41 other states since Sept. 11. 

Insurance Commissioner Harry Low labeled various of the proposed new limits and exclusions “arbitrary and-or unfair,” “overly broad and unreasonable,” and “anticompetitive.” 

Even proposed definitions of terrorism is too broad, Low said, “used to define everything ranging from vandalism to hate crimes.” He wants a narrower definition that would leave intact coverage of other incidents such as arson. 

The limitations were proposed by Insurance Services Office Inc., which drafts proposed regulations for the insurance industry. They were approved by the National Association of Insurance Commissioners, which represents state regulators, over the objections of regulators from California, New York and Connecticut. 

Jim Masek, regional director of government relations at the Insurance Services Office’s San Francisco office, said the ISO is evaluating the rejection but may ask Low’s office to reconsider. The ISO can modify its application, accept the disapproval, or request a hearing. 

Low’s ruling covers both commercial and homeowners’ policies. Other states have allowed insurers to exempt commercial property from terrorist acts, and two states have allowed exemptions in homeowners’ coverage, said Scott Edelen of the California Department of Insurance. 

The proposed exclusions would kick in if a terrorist act or acts caused more than $25 million in damage nationwide within a 72-hour period, or if more than 50 people were killed or injured. Biological or chemical incidents would be totally excluded. 

Insurers told California lawmakers last month that they can absorb the $30 billion to $70 billion cost of the Sept. 11 East Coast terrorist attacks, but might be bankrupted by another act of mass destruction such as a nuclear attack. 

Insurance companies and state regulators alike have been lobbying Congress to adopt national standards that would make state actions unnecessary. Federal lawmakers are expected to resume their debate later this month. 

They also want Congress to establish an insurance fund to help pay for future terrorist acts. If not, California may need to create a state terrorism insurance pool similar to one it created to handle claims from the 1994 Northridge earthquake, Peter Gorman, vice president of the Alliance of American Insurers, told legislators. 

Insurance executives and industry analysts said they expect insurance prices will spike through this year before leveling off.