1. Forms
2. CA
3. CA-23-86

What the form is

The CA 23 86 - Exclusion of Terrorism Above Minimum Statutory Limits is an endorsement used with commercial automobile insurance policies. Its primary function is to limit the insurer's liability for losses arising from acts of terrorism. Specifically, this endorsement excludes coverage for acts of terrorism (often as defined in a broader terrorism exclusion endorsement like CA 23 84) for amounts that are above the minimum liability limits required by a state's compulsory auto insurance or financial responsibility laws. Coverage for terrorism-related losses up to these statutory minimums remains in place.

Classes of business it applies to

This endorsement can apply to a wide range of commercial auto risks, particularly those subject to the Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations. It is relevant for any business that owns, leases, or operates vehicles and could be exposed to terrorism risks, including but not limited to:

• Trucking and transportation companies
• Delivery and courier services
• Businesses with fleets of vehicles (e.g., sales, service, contracting)
• Public transportation providers (where not self-insured or covered by other specific government programs)
• Businesses operating in high-profile urban areas or near critical infrastructure
• It is also noted for use in the Massachusetts commercial residual market.

For example, if a trucking company's vehicle is involved in an event certified as an act of terrorism, and the state where the accident occurs requires a minimum liability limit of $50,000, this endorsement would mean that the policy excludes coverage for liability losses exceeding that $50,000 arising from the terrorist act, assuming the conditions of the referenced terrorism exclusion are met.

Special considerations

• Interaction with TRIA: The use of this type of endorsement is closely linked to TRIA, which provides a federal backstop for insurance losses from certified acts of terrorism. This endorsement helps insurers manage their terrorism exposure by limiting payouts to the state-mandated minimums for certain events.
• Definition of Terrorism: The scope of the exclusion depends on the definition of "terrorism" used in the policy, typically found in a primary terrorism exclusion endorsement (e.g., CA 23 84). This definition usually involves criteria related to the nature of the act, intent, and often certification by government authorities.
• State Law Variations: Minimum financial responsibility limits vary significantly from state to state. Therefore, the practical effect of this endorsement (i.e., the amount of coverage that remains) will differ based on the jurisdiction where an accident occurs.
• Compulsory Coverage: The endorsement is structured to ensure that compulsory insurance requirements are met, providing coverage up to the minimum limits mandated by law.

Key information for agents and underwriters

• Clarity for Insureds: Agents must clearly explain to insureds how this endorsement limits their coverage for terrorism-related incidents. It's crucial they understand that while some coverage remains (up to statutory limits), significant losses exceeding these minimums will be excluded.
• Risk Assessment: Underwriters will consider the insured's geographic location, nature of operations, and type of vehicles used when assessing terrorism risk. This endorsement is a tool to manage the insurer's overall terrorism exposure.
• Interaction with Other Endorsements: It's important to understand how this endorsement interacts with other terrorism-related endorsements on the policy, particularly the primary exclusion it refers to (like CA 23 84).
• Compliance: Ensure the correct edition date of the form is used as specified for the relevant state and policy period. For instance, CA 23 86 01 06 was specified for use for ceded commercial policies effective January 1, 2006, and subsequent, while CA 23 86 10 13 is listed for use in states like CT, KS, KY, NJ, OK, and OR.
• Defense Costs: Even if an insured is unlikely to be held liable for an act of terrorism involving their vehicle, they may still face defense costs. The policy's response to defense costs in such scenarios should be reviewed.