1. Forms
2. CA
3. CA-23-87

What the form is

The CA 23 87, titled "Exclusion Of Terrorism Involving Nuclear, Biological Or Chemical Terrorism Above Minimum Statutory Limits," is an endorsement used with commercial auto insurance policies. Its primary function is to limit the insurer's liability for losses arising from acts of terrorism that involve nuclear, biological, or chemical (NBC) materials. However, this exclusion only applies to the portion of the loss that exceeds the minimum liability coverage amounts mandated by the relevant state's compulsory insurance or financial responsibility laws. Essentially, the policy will still provide coverage for NBC terrorism events up to these statutory minimums.

Classes of business it applies to

This endorsement can be attached to various commercial auto coverage forms, including the Business Auto Coverage Form (CA 00 01), Auto Dealers Coverage Form, and Motor Carrier Coverage Form. Therefore, it is relevant to a wide range of businesses that have commercial auto exposures, such as:

• Businesses with vehicle fleets (e.g., delivery companies, sales fleets, service vehicles)
• Public transportation providers
• Trucking and logistics companies
• Auto dealerships
• Any commercial entity that owns, leases, or operates vehicles and is subject to state minimum auto insurance requirements.

For example, if a trucking company's vehicle is involved in a certified act of NBC terrorism, this endorsement would mean that the insurer would cover damages up to the minimum liability limits required in that state, but amounts claimed above those minimums due to the NBC terrorism event would be excluded.

Special considerations

The CA 23 87 endorsement is part of a series of forms developed by ISO in response to the Terrorism Risk Insurance Act (TRIA) and its subsequent extensions. Key considerations include:

• Statutory Minimums are Key: The most critical aspect is that the exclusion applies above minimum statutory limits. This means the policy isn't entirely void of coverage for NBC terrorism; it preserves coverage at the level required by law.
• State Specificity: The 01 06 edition of this form was noted as applying only in specific states: Connecticut, Hawaii, Kansas, Kentucky, Massachusetts, New Jersey, Oklahoma, and Oregon. It is crucial to verify the applicability of the specific edition date in the relevant jurisdiction.
• Definition of Terrorism: The definition of "terrorism" and "NBC" incidents will be as per the policy and endorsement language, often tying back to TRIA or specific state statutes.
• Interaction with other TRIA endorsements: This is one of several terrorism-related endorsements. Others, like CA 23 85 (Exclusion Of Terrorism Involving Nuclear, Biological Or Chemical Terrorism), offer a broader exclusion without the "above minimum statutory limits" provision. The choice of endorsement depends on the insurer's offerings and the insured's needs and location.

Key information for agents and underwriters

• Clear Communication: Agents must clearly explain to insureds how this endorsement works, particularly the fact that coverage up to statutory minimums remains. Misunderstanding this could lead to significant dissatisfaction at the time of a claim.
• Risk Assessment: Underwriters need to consider the insured's exposure to terrorism, including their operational area and the nature of their business, even with this exclusion in place, as the policy still provides coverage up to the statutory minimums.
• Compliance: Ensure the correct edition date is used and that the form is permissible and correctly applied according to the specific state's regulations.
• Coverage Gaps: While this endorsement provides some level of coverage, businesses with higher potential NBC terrorism exposures might need to explore standalone terrorism coverage options if available and desired, as this endorsement limits coverage above statutory minimums.
• Pricing: The presence of this endorsement reflects a limitation of coverage (above statutory minimums) for specific, high-impact events. This is factored into the overall rating and pricing of the commercial auto policy.