1. Forms
2. CG
3. CG-21-76

What the form is

The CG 21 76 is an endorsement used with various commercial liability insurance policies. Its primary function is to explicitly exclude coverage for punitive damages that may arise from a "certified act of terrorism". A "certified act of terrorism" is one that meets the criteria defined by the Terrorism Risk Insurance Act (TRIA), including certification by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the United States. This endorsement helps insurers manage their potential exposure to large, unpredictable punitive damage awards stemming from such events.

Classes of business it applies to

This endorsement can be applied to a wide array of commercial insurance policies across various industries. It is particularly relevant for businesses that might be considered higher risk targets for terrorism or those with significant public exposure, such as:

• Businesses in major metropolitan areas or near iconic landmarks
• Critical infrastructure facilities (e.g., energy, transportation, utilities)
• Large entertainment venues, shopping centers, and hospitality businesses
• Companies with significant concentrations of employees or customers

For example, a large hotel chain operating in major cities might have this endorsement on its Commercial General Liability policy to preclude coverage for punitive damages if one of its properties is affected by a certified act of terrorism.

Special considerations

Key considerations for the CG 21 76 endorsement include:

• TRIA Context: This endorsement operates within the framework of the Terrorism Risk Insurance Act. TRIA provides a federal backstop for insurance losses resulting from certified acts of terrorism. The exclusion of punitive damages by this endorsement is a specific risk management measure taken by insurers.
• Definition of Punitive Damages: Punitive damages are distinct from compensatory damages (which cover actual losses). They are intended to punish the wrongdoer and deter similar conduct. The insurability of punitive damages varies by state, and this endorsement clarifies that they are not covered in the context of certified terrorist acts, regardless of state law that might otherwise permit their coverage.
• Interaction with Other Terrorism Endorsements: The CG 21 76 is often used in conjunction with other terrorism-related endorsements that define the scope of terrorism coverage, such as those that provide coverage subject to TRIA caps (e.g., CG 21 70, CG 21 80).
• State Variations: While this is a standard ISO form, its applicability or wording might be affected by state-specific laws or regulations concerning terrorism coverage or punitive damages. For instance, a 2008 source indicated that Arkansas did not use this form. It is crucial to verify current state applicability.

Key information for agents and underwriters

For insurance agents and underwriters, the CG 21 76 presents several important points:

• Risk Assessment: Underwriters will assess the insured's terrorism exposure to determine the necessity and appropriateness of this and other terrorism-related endorsements. Factors include location, industry, and security measures.
• Clarity for Insureds: Agents must clearly explain the impact of this endorsement to insureds, ensuring they understand that while coverage for certified acts of terrorism may be provided (subject to policy terms and TRIA), punitive damages resulting from such acts are specifically excluded.
• Pricing and Coverage Scope: The presence of this exclusion can impact the pricing of terrorism coverage. It helps insurers offer terrorism coverage at more predictable rates by carving out the volatile element of punitive damages.
• Compliance: Ensure that the use of this endorsement aligns with all applicable federal and state regulations regarding terrorism insurance and the treatment of punitive damages.
• Documentation: Proper documentation of the insured's understanding and acceptance of this exclusion is important, particularly given the potentially significant financial implications of a terrorist event.