1. Forms
2. CG
3. CG-21-78

What the form is

The CG 21 78 is an endorsement to Commercial General Liability (CGL) insurance policies. Its primary function is to remove a pre-existing exclusion related to acts of terrorism. Specifically, this endorsement addresses "certified acts of terrorism" as defined under the Terrorism Risk Insurance Act (TRIA). While removing the exclusion for these certified acts, the endorsement also stipulates a cap on the amount of losses the insurer will cover for such events, aligning with the provisions of TRIA.

Classes of business it applies to

This endorsement is broadly applicable to most types of businesses that carry Commercial General Liability insurance. It is particularly relevant for businesses that may have a higher perceived risk of terrorism due to their location, nature of operations, or contractual requirements. Examples include:

• Owners and operators of commercial real estate, especially in urban centers or high-profile locations.
• Businesses involved in industries considered critical infrastructure.
• Organizations hosting large public gatherings.
• Construction projects, particularly those of significant scale or public importance.
• Any business where lenders or contractual agreements mandate terrorism coverage.

For instance, the owner of a large shopping mall or a company constructing a new downtown skyscraper would likely consider this endorsement to ensure they have coverage for certified acts of terrorism.

Special considerations

The CG 21 78 was developed as a direct response to the Terrorism Risk Insurance Act (TRIA), a U.S. federal law that created a system for shared public and private compensation for insured losses resulting from certified acts of terrorism. Key considerations include:

• Certified Acts of Terrorism: Coverage is specifically for acts certified by the Secretary of the Treasury (in concurrence with the Secretary of State and the Attorney General) as acts of terrorism under TRIA. Acts not meeting this certification are not covered by this endorsement.
• Cap on Losses: The endorsement includes a cap on the insurer's liability, which is tied to the TRIA framework. This means the full extent of all losses may not be covered if they exceed these caps.
• TRIA Compliance: Use of this form helps insurers comply with TRIA requirements to make terrorism coverage available.
• Fast-Tracked Form: This endorsement was among a set of forms that were "fast-tracked" for approval and use, allowing insurers to implement TRIA-related coverage changes more quickly, including for mid-term policies.

Key information for agents and underwriters

For Agents:

• It's crucial to explain to insureds that this endorsement removes an exclusion for certified acts of terrorism but also imposes a cap on losses as per TRIA.
• Clarify the definition of a "certified act of terrorism" and that non-certified events may still be excluded or handled differently.
• Discuss the implications of the cap on losses and whether additional, separate terrorism coverage might be advisable depending on the client's risk profile.

For Underwriters:

• Risk assessment should consider the insured's geographic location, industry, and specific terrorism-related exposures.
• Pricing for this coverage will reflect the terrorism risk profile and the insurer's participation in the TRIA program.
• Understand that this endorsement specifically addresses certified acts under TRIA; other terrorism-related endorsements might be necessary for broader or different terrorism coverage.
• Be aware of the specific edition date (11 02) and its implications, as insurance forms evolve.