1. Forms
2. CU
3. CU-21-37

What the Form Is

The CU 21 37 11 02 endorsement, titled "Exception to Terrorism Exclusion for Certified Acts of Terrorism: Cap On Losses From Certified Acts of Terrorism," is designed to alter a standard terrorism exclusion found in commercial insurance policies. Its primary function is to create a specific exception to this exclusion, allowing for coverage in the event of a "certified act of terrorism." However, this coverage is not unlimited; the endorsement also clearly stipulates a maximum limit, or "cap," on the amount the insurer will pay for losses resulting from such certified acts. This form helps insurers comply with requirements like those that may arise from the Terrorism Risk Insurance Act (TRIA) by offering a defined level of terrorism coverage.

Classes of Business It Applies To

This endorsement is relevant for a wide range of commercial insurance lines where terrorism risk is a significant consideration. It can be attached to policies for various businesses, including but not limited to:

• Commercial Property (covering buildings, business personal property, business income)
• Commercial General Liability
• Commercial Umbrella or Excess Liability policies

Real-world example: A large manufacturing facility located near critical infrastructure might opt for this endorsement. If a government-certified act of terrorism causes damage to their plant and results in business interruption, this endorsement would allow them to claim for losses up to the specified cap, whereas a standard terrorism exclusion might have denied all coverage.

Special Considerations

• "Certified Acts" Requirement: A crucial aspect of this endorsement is that the act of terrorism must be officially "certified" as such by the U.S. Secretary of the Treasury (in consultation with the Secretary of Homeland Security and the Attorney General) for the exception to apply. If an event that appears to be terrorism is not officially certified, this endorsement would not provide coverage.
• The Cap on Losses: The "Cap On Losses From Certified Acts of Terrorism" is a significant limitation. This cap will be a predetermined amount, which could be a fixed dollar sum or a percentage of other policy limits. It's vital that the insured understands that losses exceeding this cap will not be covered by this endorsement.
• TRIA Context: This form was developed in the context of the Terrorism Risk Insurance Act (TRIA) and its reauthorizations, which aim to ensure the availability of terrorism coverage. This endorsement is one mechanism insurers use to provide the required coverage while managing their overall exposure.
• Interaction with Base Exclusions: This form modifies an existing, broader terrorism exclusion. It does not eliminate the exclusion entirely but carves out a specific, limited exception.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters must evaluate the insured's specific terrorism exposure. Factors include geographic location (e.g., proximity to high-profile targets or urban centers), industry type, and the nature of the insured's operations.
• Pricing and Limits: The premium associated with this endorsement should reflect the limited nature of the coverage (i.e., contingent on certification and subject to a cap). The appropriateness of the cap amount should be discussed and determined based on the insured's needs and the underwriter's risk appetite.
• Clear Communication: Agents have a responsibility to clearly explain the conditions and limitations of this endorsement to the insured. Particular emphasis should be placed on the "certified act" trigger and the functioning of the loss cap.
• Potential Coverage Gaps: Agents and underwriters should be aware that this endorsement will not cover all terrorism-related losses. Acts not certified, or losses exceeding the cap, will remain uncovered by this specific form. Clients may need to consider other risk management strategies or specialized insurance products for broader terrorism coverage.
• Compliance: Ensure that the use of this form, and the terrorism coverage offered, aligns with all applicable federal and state regulations, including TRIA requirements.