What the form is
The CG 21 74 endorsement is an exclusionary form used with the Commercial General Liability (CGL) coverage part. Its primary purpose is to eliminate coverage for losses stemming from specific types of terrorism. It explicitly excludes coverage for 'certified acts of terrorism,' which are acts certified by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the United States, as meeting the criteria outlined in the Terrorism Risk Insurance Act (TRIA). Furthermore, this endorsement also broadly excludes coverage for any other acts of terrorism involving nuclear, biological, or chemical materials, regardless of whether they are 'certified' under TRIA.
Classes of business it applies to
This endorsement can be applied to a wide range of commercial general liability policies across various industries. Its use became more prevalent after the events of September 11, 2001, and the subsequent enactment of TRIA. It is particularly relevant for businesses perceived to be at a higher risk of being targeted by or affected by terrorism, including but not limited to:
- Businesses in major metropolitan areas or near high-profile landmarks.
- Energy, utility, and transportation infrastructure.
- Large public venues (stadiums, shopping malls).
- Chemical or biological research facilities.
- Financial institutions.
Real-world example: A commercial property owner in a major city might have this endorsement attached to their CGL policy, meaning that if a terrorist event involving a chemical agent caused property damage and bodily injury, their standard CGL policy with this endorsement would not cover those losses unless specific terrorism coverage has been purchased separately.
Special considerations
It's crucial to understand that this endorsement significantly limits coverage for terrorism-related events. Key considerations include:
- TRIA Requirements: Insurers are generally required by TRIA to offer coverage for certified acts of terrorism, but this coverage can be rejected by the insured. This endorsement is used when the insured either rejects TRIA coverage or when the insurer is excluding non-certified acts involving nuclear, biological, or chemical terrorism.
- Definition of Terrorism: The definitions of 'certified act of terrorism' and other nuclear, biological, or chemical acts are specific and should be carefully reviewed.
- Coverage Gaps: The application of this endorsement creates a significant coverage gap for terrorism-related losses. Businesses needing this coverage must typically purchase separate, specific terrorism insurance policies.
- Interaction with Other Endorsements: This endorsement may interact with other terrorism-related endorsements. For example, CG 21 70 (Cap On Losses From Certified Acts Of Terrorism) might be used if some level of certified terrorism coverage is provided.
Real-world example: A manufacturing plant that uses certain chemicals could face significant uninsured losses if a non-certified terrorist act involving the release of those chemicals occurs, as this endorsement would likely preclude coverage under their standard CGL.
Key information for agents and underwriters
Agents and underwriters need to be acutely aware of the implications of this endorsement:
- Risk Assessment: Underwriters must assess the terrorism exposure of the insured. For high-risk exposures, the use of this exclusion (or a suite of terrorism exclusions) is common.
- Pricing: While this is an exclusion, the overall premium for the policy will reflect the remaining covered risks. The decision to accept or reject TRIA coverage (which this endorsement relates to) will impact the premium.
- Coverage Explanation: Agents have a critical role in explaining the impact of this exclusion to insureds, ensuring they understand the lack of coverage for these specific terrorism events and the availability of buy-back options or separate terrorism policies.
- Regulatory Environment: Stay informed about TRIA and any reauthorizations or changes, as they can impact terrorism coverage and the use of related endorsements.
- Alternative Solutions: Be prepared to discuss standalone terrorism insurance options if the insured has an exposure they wish to cover that is excluded by this endorsement.