What the form is
The CG 21 89, titled "Conditional Limitation of Coverage for Terrorism on an Annual Aggregate Basis (Relating to Disposition of Federal Terrorism Risk Insurance Act)," is an endorsement used with Commercial General Liability (CGL) policies. Its primary function is to address how coverage for acts of terrorism will be handled based on the status of the federal Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations (the Program). If TRIP is terminated, this endorsement activates an exclusion for terrorism, which would then override any other terrorism endorsements on the policy. Conversely, if TRIP remains in effect, this specific exclusion does not apply; however, any terrorism coverage provided under the policy becomes subject to an annual aggregate sub-limit specified in the endorsement's schedule.
Classes of business it applies to
This endorsement is not specific to particular industries but applies broadly to any commercial insured whose CGL policy includes terrorism coverage and where the insurer wishes to manage its terrorism exposure contingent on the status of the federal backstop provided by TRIP. It is relevant for businesses of all sizes and types that may have exposure to terrorism risks and are subject to the terms of TRIA. For example, a commercial property owner in a major metropolitan area or a large public venue might have this endorsement attached to their CGL policy.
Special considerations
A key consideration for this endorsement is its conditional nature, which is directly tied to the existence and status of the Terrorism Risk Insurance Program. Policyholders need to understand that the extent of their terrorism coverage can change based on federal legislative action regarding TRIP. If TRIP expires and is not renewed, this endorsement would generally lead to a significant reduction or elimination of terrorism coverage, subject to any other policy terms. When this endorsement is added to a claims-made policy, it is often required that endorsement CG 21 93 (Extended Reporting Period For Terrorism Coverage) also be attached. This provides a five-year extended reporting period for acts of terrorism that would be excluded under CG 21 89 if TRIP is terminated, but which occurred before such termination.
Key information for agents and underwriters
For agents, it's crucial to clearly explain the conditional nature of this endorsement to insureds, ensuring they understand how their terrorism coverage might be affected by changes to TRIP. The presence of an annual aggregate limit for terrorism coverage, even when TRIP is active, is a significant detail that must be highlighted. Underwriters use this form to manage their aggregate exposure to terrorism losses. The specific sub-limit shown in the schedule is a critical underwriting decision, likely influenced by the insured's risk profile, location, and the insurer's overall terrorism risk aggregation strategy. Underwriters must also ensure proper coordination with other terrorism-related endorsements on the policy and be mindful of regulatory requirements in specific states concerning terrorism coverage. When TRIP is up for renewal, insurers and agents should proactively communicate with policyholders about the potential implications of this endorsement.