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2. CU
3. CU-21-40

What the form is

The CU 21 40 is an endorsement designed for use with the Insurance Services Office (ISO) Commercial Liability Umbrella Coverage Form (CU 00 01). Its primary function is to exclude coverage for bodily injury, property damage, and personal and advertising injury that arises from "certified acts of terrorism" specifically involving nuclear, biological, chemical, or radiological (NBCR) materials. Furthermore, this endorsement incorporates a cap on the insurer's potential payout for losses resulting from such certified acts of terrorism. This cap is consistent with the provisions outlined in the federal Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations.

Classes of business it applies to

This endorsement can be attached to Commercial Liability Umbrella policies across a diverse range of industries. Any business entity that procures an umbrella liability policy might encounter this endorsement, especially if the insurer aims to limit or specifically exclude coverage for NBCR terrorism perils, even if broader terrorism coverage is provided or available through other means. Examples of entities where this might be relevant include:

• Real estate owners and developers, particularly of high-profile properties
• Manufacturing companies, especially those dealing with hazardous materials
• Public entities and municipalities
• Large retail operations or entertainment venues attracting significant public presence

The decision to append this endorsement often hinges on the insurer's underwriting guidelines, its reinsurance treaty stipulations regarding terrorism exposures, and the perceived risk profile of the insured.

Special considerations

• TRIA Dependency: The terminology and mechanics of this form are closely linked to the definitions and operational aspects of the Terrorism Risk Insurance Act. A "certified act of terrorism" is one formally certified as such by the U.S. Secretary of the Treasury.
• NBCR Specificity: The exclusion is narrowly focused on terrorism events involving nuclear, biological, chemical, or radiological agents. Other forms of terrorism (e.g., those using conventional weapons) may be addressed differently by the policy or other endorsements.
• Loss Limitation: The cap on losses is a critical feature, restricting the insurer's maximum payout for a single certified NBCR terrorism event. The TRIA program may provide a backstop for losses exceeding certain insurer and industry thresholds, up to an overall program cap.
• Interaction with Underlying Policies: Umbrella policies provide coverage in excess of primary (underlying) insurance. The application of CU 21 40 will interact with how terrorism risks are handled in these primary policies. If underlying policies contain broader terrorism exclusions, this umbrella endorsement serves to clarify the umbrella insurer's specific stance on NBCR terrorism events.

Key information for agents and underwriters

• Risk Evaluation: Underwriters must evaluate an insured's potential exposure to terrorism, including the severe but less frequent NBCR perils. Factors such as the insured's location (e.g., major urban areas, proximity to critical infrastructure), nature of operations, and public profile can influence this assessment, though the catastrophic and often unpredictable nature of terrorism makes precise quantification difficult.
• Explaining Coverage Clearly: Agents have a responsibility to clearly communicate the impact of this endorsement to insureds. Policyholders need to understand that events defined as NBCR terrorism are largely excluded and that a financial cap applies to certified acts.
• Pricing Implications: While CU 21 40 is an exclusionary endorsement, the overall terrorism risk profile of an insured, along with the suite of terrorism-related endorsements attached to the policy, will influence the premium for the umbrella coverage.
• Coordination with Other Endorsements: It is vital for underwriters and agents to ensure that this endorsement is used in harmony with other terrorism-related endorsements that may be part of the policy. For example, endorsements that might provide limited buy-back options, address coverage for non-certified acts, or specifically address terrorism coverage for automobile liability (like CU 21 55) or punitive damages (like CU 21 42) must be considered.
• Regulatory Awareness: Insurance professionals should remain informed about the status of TRIA, including any reauthorizations or amendments, as well as any evolving regulatory interpretations concerning terrorism coverage, as these can affect the application and interpretation of this and similar endorsements.