1. Forms
2. CG
3. CG-21-71

What the Form Is

The CG 21 71 is an endorsement issued by the Insurance Services Office (ISO) for use with various commercial liability coverage forms. Its primary purpose is twofold: first, to exclude coverage for acts of terrorism committed outside the United States that do not meet the definition of a "certified act of terrorism" under the federal Terrorism Risk Insurance Act (TRIA). Second, it affirms the application of the federally mandated cap on an insurer's liability for losses stemming from "certified acts of terrorism". This endorsement helps insurers manage their terrorism exposure in line with TRIA provisions.

Classes of Business It Applies To

This endorsement can be attached to a wide range of commercial liability policies. It is commonly used with:

• Commercial General Liability (CGL) Coverage Part (e.g., CG 00 01)
• Owners and Contractors Protective Liability (OCP) Coverage Part
• Liquor Liability Coverage Part
• Pollution Liability Coverage Part
• Products/Completed Operations Liability Coverage Part

It is relevant for most types of businesses, but particularly critical for those with international operations, employees who travel abroad, or any entity whose terrorism risk profile is being managed under TRIA. For example, a multinational corporation would need to understand how this endorsement limits coverage for terrorist acts occurring at their overseas locations if those acts are not certified under TRIA.

Special Considerations

• TRIA Framework: The endorsement operates within the framework of the Terrorism Risk Insurance Act. Understanding TRIA, including its definitions of "certified act of terrorism" and the mechanism for certification by the Secretary of the Treasury, is essential to interpreting this endorsement.
• Geographical Scope of Exclusion: The exclusion for "other acts of terrorism" (i.e., non-certified acts) is specifically limited to those committed outside the United States. Terrorism within the U.S. would be treated differently, typically covered if it's a "certified act" and the insured has accepted TRIA coverage.
• Cap on Losses: The endorsement reinforces that if a "certified act of terrorism" occurs, the insurer's liability (and the collective liability of all insurers) is subject to the financial caps established by TRIA. If aggregate insured losses surpass these caps, payments may be reduced on a pro-rata basis.
• Interaction with TRIA Offer: Under TRIA, insurers are generally required to make coverage available for certified acts of terrorism. This endorsement is part of defining the terms and conditions of that coverage, particularly by carving out certain non-certified international acts and applying the statutory cap.

Key Information for Agents and Underwriters

• For Agents: It is crucial to explain to insureds, especially those with any international exposure, how this endorsement impacts their coverage. They need to understand that terrorist acts outside the U.S. that are not "certified" by the Treasury Secretary are excluded. The implications of the TRIA cap on losses for certified acts should also be clearly communicated.
• For Underwriters: This endorsement is a tool for managing terrorism risk accumulation and ensuring policy language aligns with TRIA. When assessing risk, underwriters should consider the insured's geographical footprint and the potential for terrorism losses both domestically and internationally. The distinction between "certified acts" (generally covered if TRIA coverage is elected, subject to the cap) and "other acts of terrorism committed outside the United States" (excluded by CG 21 71) is a critical underwriting and coverage determination factor. Pricing for terrorism coverage should reflect the scope of coverage provided after application of such endorsements.