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What the form is

The CU 21 38 11 02 is an endorsement to a Commercial Liability Umbrella insurance policy. Its primary function is twofold: first, it removes an existing exclusion related to 'certified acts of terrorism' that might otherwise limit or negate coverage for such events. Second, it establishes that any payments for losses arising from 'certified acts of terrorism' will be subject to an overall cap on losses. This cap is generally tied to the framework established by the Terrorism Risk Insurance Act (TRIA) in the United States.

Classes of business it applies to

This endorsement is not specific to particular industries but applies broadly to any commercial entity that has a Commercial Liability Umbrella policy and requires or is offered coverage for 'certified acts of terrorism' under TRIA. Examples of businesses that might utilize this endorsement include:

• Large property owners or real estate developers
• Manufacturing companies
• Retail chains
• Hospitality businesses
• Transportation and logistics companies
• Any business with significant public presence or exposure that could be a target or incidental victim of a terrorist act and seeks to have terrorism coverage included in their umbrella policy.

Essentially, any insured seeking to ensure their umbrella policy responds to large-scale, certified terrorist events, subject to TRIA limitations, would find this endorsement relevant.

Special considerations

• TRIA Dependence: The application and interpretation of this endorsement are heavily dependent on the Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations. Key terms like 'certified act of terrorism' are defined by TRIA (an act certified by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General).
• Cap on Losses: The 'cap on losses' mentioned typically refers to the annual aggregate industry-wide cap on insured terrorism losses under TRIA (e.g., $100 billion). If this cap is reached, the federal government and insurers have specific responsibilities for further payments.
• Removal of Exclusion: It's crucial to understand which specific terrorism exclusion(s) in the policy are being removed by this endorsement to ascertain the breadth of coverage being reinstated.
• Policy Hierarchy: As an umbrella endorsement, its terms will apply in conjunction with the underlying primary policies. The interaction between the umbrella and underlying coverage for terrorism events should be clearly understood.

Real-world example: If a large commercial complex has a Commercial Liability Umbrella policy and this endorsement is attached, and a terrorist act occurs that is officially 'certified' under TRIA, this endorsement would ensure that the umbrella policy's exclusion for such an event is removed, and coverage would apply, subject to the policy terms and the overall TRIA program cap.

Key information for agents and underwriters

• Agent's Role: Agents must clearly explain to insureds what constitutes a 'certified act of terrorism' under TRIA and the implications of the 'cap on losses'. They should ensure the insured understands that this endorsement provides coverage by removing an exclusion, but within the TRIA framework.
• Underwriting Assessment: Underwriters need to evaluate the insured's overall terrorism exposure. While TRIA provides a federal backstop, the nature of the insured's operations, location, and potential as a target are still relevant risk factors.
• Pricing: The premium charged for terrorism coverage, which this endorsement facilitates by removing an exclusion, is a separate consideration.
• Coverage Gaps: It's important to identify any potential gaps, such as for acts of terrorism that are not 'certified' under TRIA, or for losses exceeding the TRIA cap if not otherwise addressed by the policy.
• Clarity on Terms: Ensure that the policy clearly defines how it responds to terrorism, both certified and non-certified, and how this endorsement interacts with other policy provisions.