What the form is
The CG 21 87, titled "Conditional Exclusion Of Terrorism (Relating to Disposition of Federal Terrorism Risk Insurance Act)", is an endorsement used with Commercial General Liability (CGL) policies and other liability coverage forms. Its primary function is to address coverage for acts of terrorism in relation to the federal Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations (TRIPRA). Specifically, this endorsement stipulates that if the Terrorism Risk Insurance Program (TRIP or the Program) is terminated, the exclusionary part of this endorsement will activate and supersede any other terrorism endorsement on the policy. Conversely, if the Program is renewed or otherwise remains in effect, this conditional exclusion does not apply.
When active (i.e., if TRIP is terminated), the endorsement excludes injury or damage resulting from terrorism. The definition of terrorism for this exclusion is not limited to only "certified acts of terrorism" but requires that the excluded acts must either involve nuclear, biological, or chemical agents, or cause an aggregate property loss exceeding $25,000,000, or result in the death or serious injury of 50 or more persons.
Classes of business it applies to
This endorsement can be attached to various liability policies across numerous industries. Since the Terrorism Risk Insurance Act applies broadly, this conditional endorsement could be relevant to most commercial insureds. Examples include:
- Businesses purchasing Commercial General Liability (CGL) coverage.
- Entities requiring Railroad Protective Liability.
- Businesses with Liquor Liability exposures.
- Owners and Contractors Protective Liability policies.
Essentially, any business or organization that has a general liability policy and is subject to the provisions of TRIA could encounter this endorsement. For example, a real estate development company with a CGL policy might have this endorsement attached. If TRIA were to expire without renewal, this endorsement would then dictate how terrorism losses are covered (or excluded) under their policy.
Special considerations
The key consideration for this endorsement is the status of the federal Terrorism Risk Insurance Program. The Terrorism Risk Insurance Act has been extended multiple times, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2019, which extended the program through December 31, 2027. Policyholders, agents, and underwriters must be aware of the current status of TRIA, as the applicability of CG 21 87 hinges on it.
If TRIA is not renewed or is terminated, this endorsement automatically triggers the exclusion of terrorism coverage as defined within the endorsement, potentially creating a significant coverage gap unless other arrangements are made. It's important to note that if this endorsement is added to a claims-made policy, endorsement CG 21 93 (Extended Reporting Period For Terrorism Coverage) must also be attached. This provides a five-year extended reporting period for acts of terrorism that would be excluded by CG 21 87 but occurred before the non-renewal of TRIA.
Key information for agents and underwriters
For agents and underwriters:
- TRIA Status Monitoring: It is crucial to stay informed about the legislative status of TRIA. The expiration or modification of TRIA directly impacts the effect of this endorsement.
- Client Communication: Agents should clearly explain the conditional nature of this endorsement to insureds. Clients need to understand that their terrorism coverage could change significantly if TRIA is not extended.
- Coverage Alternatives: If TRIA were to expire, underwriters and agents would need to discuss alternative terrorism coverage options with insureds, which might include standalone terrorism policies or specific terrorism endorsements that provide coverage irrespective of TRIA.
- Interaction with Other Endorsements: Understand how CG 21 87 interacts with other terrorism-related endorsements on the policy. The CG 21 87 states that its exclusionary portion will supersede other terrorism endorsements if TRIP is terminated.
- Pricing/Risk Assessment: While TRIA is in effect, the pricing impact of this specific conditional endorsement might be minimal, as its exclusionary provisions are not active. However, the overall pricing for terrorism coverage will be influenced by TRIA's provisions (like the insurer deductible and federal share of compensation). If TRIA expires, the market for terrorism coverage, and consequently its pricing and availability, would likely change significantly.