1. Forms
2. CU
3. CU-21-32

What the form is

The CU 21 32, titled "Nuclear, Biological Or Chemical Terrorism Exclusion (Other Than Certified Acts of Terrorism); Cap On Losses From Certified Acts of Terrorism Endorsement," is an exclusion endorsement designed for Commercial Liability Umbrella policies. Its primary function is to limit an insurer's exposure to catastrophic losses resulting from specific types of terrorist attacks. The form excludes coverage for bodily injury or property damage arising from the use, release, or escape of nuclear materials, radiation, radioactive contamination, or the dispersal or application of pathogenic or poisonous biological or chemical materials in a terrorist act. However, this exclusion does not apply if the event is officially declared a "certified act of terrorism" under the federal Terrorism Risk Insurance Act (TRIA). For such certified acts involving nuclear, biological, or chemical means, the endorsement then imposes a cap on the amount the insurer will pay.

Classes of business it applies to

This endorsement is relevant for a wide range of commercial insureds who carry Commercial Liability Umbrella insurance and could be exposed to terrorism risks. It is particularly pertinent for:

• Businesses with high concentrations of people (e.g., shopping malls, entertainment venues, transportation hubs).
• Owners/operators of critical infrastructure (e.g., energy facilities, public utilities, communication networks).
• Companies with high-value assets or significant symbolic importance that could be terrorist targets.
• Businesses located in major metropolitan areas or near potential targets.

For example, a large downtown office building, a chemical manufacturing plant, or a major sports stadium might have this endorsement on their umbrella policy to manage the insurer's potential payout in the event of a large-scale NBC terrorist attack.

Special considerations

Several important points should be considered with this endorsement:

• TRIA Certification is Key: The distinction between a "certified act of terrorism" under TRIA and other acts of terrorism is crucial. Coverage for NBC terrorism under this endorsement hinges on this official certification by the U.S. Secretary of the Treasury. Without certification, NBC terrorism events are broadly excluded.
• Cap on Certified Acts: Even if an NBC terrorist event is certified under TRIA, this endorsement introduces a cap on the insurer's liability, which would be specified in the policy.
• Interaction with Underlying Policies: The umbrella policy sits on top of underlying liability policies (like Commercial General Liability). It's important to understand how terrorism is addressed in those primary policies, as this umbrella endorsement will respond in excess of those.
• Regulatory Landscape: The Terrorism Risk Insurance Act and its various extensions have shaped how insurers offer terrorism coverage. This endorsement is a direct result of insurers managing the potentially massive exposures TRIA requires them to cover.
• State Variations: While this is an ISO form, its adoption and specific wording can sometimes be subject to state-specific regulations or approvals. For instance, its use in North Carolina was noted as withdrawn at one point.

Key information for agents and underwriters

For insurance professionals, the CU 21 32 presents several practical points:

• Agent Responsibilities: Agents must clearly explain the scope of this exclusion to their clients. Policyholders need to understand that coverage for NBC terrorism is significantly limited and contingent on TRIA certification, and even then, subject to a cap. Misunderstanding this could lead to significant dissatisfaction at the time of a claim.
• Underwriting Assessment: Underwriters need to evaluate the insured's specific terrorism exposure. This includes their location, industry, public profile, and any risk mitigation measures in place. The decision to apply this endorsement, and the specific cap amount, will be influenced by this risk assessment.
• Coverage Gaps: This endorsement creates a clear exclusion for non-certified NBC terrorism. Agents should discuss potential coverage gaps with clients and explore if any specialized, standalone terrorism policies might be available or appropriate, though coverage for NBC perils is often very limited and expensive in the standalone market.
• Pricing: The presence of this exclusion and the TRIA framework influence the pricing of terrorism coverage within the umbrella policy.
• Clarity on "Certified Acts": Ensure the insured understands the process and criteria for an event to be deemed a "certified act of terrorism." It is a formal governmental process and not an automatic designation.