1. Forms
2. CU
3. CU-21-45

What the form is

The CU 21 45 is an endorsement to an Insurance Services Office (ISO) Commercial Liability Umbrella Coverage Form. Its primary purpose is to conditionally exclude coverage for losses arising from acts of terrorism, with a specific focus on terrorism involving nuclear, biological, or chemical (NBC) materials. The 'conditional' aspect means that the exclusion's activation is tied to the status of the federal Terrorism Risk Insurance Act (TRIA). If the Terrorism Risk Insurance Program is terminated, the exclusionary language in this endorsement becomes effective. Conversely, if the program is renewed or active, this specific exclusion may not apply, or its terms are superseded by other policy provisions or endorsements related to TRIA.

Classes of business it applies to

This endorsement can be applied to a wide range of commercial enterprises that carry a Commercial Liability Umbrella policy. It is particularly relevant for businesses that could be potential targets or have significant exposure to terrorism risks, including but not limited to:

• Businesses in high-profile urban areas or near landmark locations.
• Critical infrastructure sectors (e.g., energy, transportation, telecommunications).
• Large public venues (e.g., stadiums, convention centers, shopping malls).
• Companies involved in research or handling of sensitive materials.
• Any business where the insurer wishes to manage its NBC terrorism exposure contingent on the federal TRIA program.

For example, a large commercial real estate owner with properties in major cities might have this endorsement on their umbrella policy. If TRIA were to expire without renewal, this endorsement would then activate to exclude NBC terrorism events from their umbrella coverage.

Special considerations

There are several important considerations when using the CU 21 45 endorsement:

• TRIA Dependency: The most critical aspect is its direct link to the Terrorism Risk Insurance Act. Policyholders and insurance professionals must stay informed about the current status of TRIA, as its expiration, renewal, or modification directly impacts the applicability of this exclusion.
• NBC Focus: While it addresses terrorism broadly, its specific exclusionary language often emphasizes nuclear, biological, and chemical terrorism.
• Claims-Made Policies: If endorsement CU 21 45 (or CU 21 44) is attached to a claims-made policy, endorsement CU 21 48 (Extended Reporting Period For Terrorism Coverage) must also be attached. This provides a five-year extended reporting period for acts of terrorism that are excluded by CU 21 45 but occurred before the non-renewal of TRIA.
• Superseding Language: The endorsement states that if the TRIA program is terminated, the exclusionary portion of this endorsement will apply and supersede any other terrorism endorsement on the policy.

For instance, if a chemical plant has this endorsement and TRIA lapses, an act of chemical terrorism causing third-party liability would likely be excluded under their umbrella policy due to this endorsement taking effect.

Key information for agents and underwriters

Agents and underwriters should be mindful of the following:

• Client Communication: Agents must clearly explain the conditional nature of this exclusion to their clients. It's vital for insureds to understand how changes in federal law (TRIA) can alter their coverage for specific terrorism events.
• Risk Assessment: Underwriters need to evaluate the insured's specific terrorism exposure, including potential NBC risks. This assessment will help determine the appropriateness of this endorsement.
• TRIA Compliance: Ensure all necessary TRIA-related disclosures are provided to the insured.
• Interaction with Other Endorsements: Be aware of how CU 21 45 interacts with other terrorism-related endorsements on the policy, especially if TRIA is active. Confirm that mandatory related endorsements, like CU 21 48 for claims-made policies, are included when required.
• Pricing: The perceived risk of TRIA not being renewed and the specific NBC exposure of the insured may influence underwriting and pricing decisions related to terrorism coverage.
• Coverage Gaps: If TRIA is not in effect and this exclusion applies, it could create a significant coverage gap for NBC terrorism events. Agents should discuss potential alternative risk transfer or mitigation strategies with clients if this is a major concern.