1. Forms
2. CU
3. CU-21-44

What the form is

The CU 21 44, titled "Conditional Exclusion Of Terrorism (Relating To Disposition Of Federal Terrorism Risk Insurance Act)", is an endorsement to a Commercial Liability Umbrella insurance policy. Its primary function is to exclude coverage for "bodily injury", "property damage", or "personal and advertising injury" arising out of an "act of terrorism", but this exclusion is conditional. The conditions under which this exclusion applies are typically tied to the federal Terrorism Risk Insurance Act (TRIA), including its expiration, non-renewal, or significant alteration. The endorsement clarifies how terrorism-related losses will be addressed under the umbrella policy if TRIA is not in effect or its terms change significantly. It is important to note that this endorsement does not create coverage for injury or damage that is otherwise excluded under the policy.

Classes of business it applies to

This endorsement is not specific to particular industries but can be applied to virtually any commercial insured that has a Commercial Liability Umbrella policy. Insurers may use this endorsement across a wide range of business types to manage their terrorism risk exposure. Examples could include:

• Real estate owners and developers
• Manufacturing companies
• Retail businesses
• Service industries
• Non-profit organizations
• Homeowners Associations

Essentially, any entity seeking or renewing umbrella liability coverage where the insurer wants to make terrorism coverage conditional on TRIA's status could see this endorsement.

Special considerations

• TRIA Dependency: The core feature of this endorsement is its linkage to the Terrorism Risk Insurance Act. Its provisions typically become applicable if TRIA expires, is not renewed, or if the government's share of compensation under TRIA is altered.
• Offer of Coverage: Under TRIA, insurers are generally required to make coverage available for certified acts of terrorism. This endorsement often works in tandem with the TRIA framework, outlining what happens if TRIA is no longer in place or if the insured rejects TRIA-related coverage offers.
• Definition of Terrorism: The definition of what constitutes an "act of terrorism" is critical and is usually defined within the endorsement, often referencing or aligning with the definition in TRIA.
• Claims-Made Policies: If the umbrella policy is a claims-made policy, the attachment of CU 21 44 may necessitate the addition of another endorsement, such as CU 21 48 (Extended Reporting Period For Terrorism Coverage), to address claims reported after the policy period for acts that occurred prior to TRIA's disposition.

Key information for agents and underwriters

• Risk Management: For underwriters, this form is a tool to manage and limit the insurer's exposure to potentially catastrophic losses from acts of terrorism, particularly in scenarios where the federal TRIA backstop may not be available or is altered.
• Client Communication: Agents must clearly explain to insureds the conditional nature of this exclusion and its implications, especially how it interacts with TRIA and any primary layer terrorism coverage the insured may have. It's crucial for insureds to understand when this exclusion might activate and result in a gap in their umbrella coverage for terrorism events.
• Coverage Gaps: If the conditions for the exclusion are met (e.g., TRIA expires without replacement), the insured would have no umbrella coverage for the defined acts of terrorism unless they have secured specific standalone terrorism coverage.
• Pricing and Premiums: The decision to include or exclude terrorism coverage, or to make it conditional, can impact policy premiums. TRIA itself has requirements regarding the disclosure of the portion of the premium attributable to terrorism coverage.
• Regulatory Landscape: Awareness of the current status of TRIA and any related regulations is essential when dealing with this endorsement.