1. Forms
2. IL
3. IL-09-53

What the Form Is and Its Purpose

The IL 09 53 - Exclusion Of Certified Acts Of Terrorism endorsement is an insurance policy provision that specifically excludes coverage for losses and damages resulting from "certified acts of terrorism". A "certified act of terrorism" is one formally declared as such by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the United States, under the terms of the Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations. The primary purpose of this form is to remove coverage for these specific, large-scale events from a standard insurance policy, often when the insured has declined to purchase separate terrorism coverage or when the insurer is managing its terrorism exposure.

Classes of Business It Applies To with Real-World Examples

This endorsement is typically used with various commercial lines of insurance. Examples include:

• Commercial Property: If a commercial building (e.g., an office complex, manufacturing plant, retail store) is damaged or destroyed by a certified act of terrorism, this endorsement would mean the property policy does not cover the loss.
• Commercial Inland Marine: Coverage for mobile equipment or specialized property (e.g., construction equipment, transported goods) damaged due to a certified terrorist event would be excluded.
• Equipment Breakdown: If critical machinery within a facility breaks down as a direct result of a certified act of terrorism, this endorsement would preclude coverage for the repair or replacement.
• Farm Property: Similar to commercial property, farm buildings, equipment, or other insured farm property damaged by a certified act of terrorism would not be covered.

For instance, if a business owner has a commercial property policy with the IL 09 53 endorsement attached and their property sustains damage from an event officially certified as an act of terrorism, they would not be able to claim for those damages under that policy.

Special Considerations, Limitations, and Requirements

• TRIA Context: This form operates within the framework of TRIA, which requires insurers to make terrorism coverage available but also allows for exclusions if the coverage is declined or if specific conditions are met.
• "Certified Acts" Only: The exclusion is specific to "certified acts of terrorism." Losses from acts of terrorism that are not certified by the government may be treated differently under the policy, subject to other exclusions (e.g., war, rebellion).
• Fire Following States: Some states have specific regulations regarding coverage for fire damage that follows a terrorist act (often referred to as "fire following" states). Even with this exclusion, there might be instances where fire damage is still covered, depending on state law and the specific policy language. It's crucial to review state-specific requirements.
• Offer of Coverage: Insurers are generally required to offer terrorism coverage. This exclusion is typically used when the insured rejects that offer. Proper documentation of the offer and rejection is essential.

Key Information for Agents and Underwriters

• For Agents:
  • It is critical to clearly explain the implications of this endorsement to the insured. They must understand that by accepting this endorsement (or by rejecting terrorism coverage, leading to this endorsement), they will not have coverage for losses from certified acts of terrorism.
  • Ensure the insured is made aware of their option to purchase terrorism coverage and document their decision.
  • Be aware of any state-specific laws or regulations that might impact how this exclusion applies, particularly concerning fire damage.
• For Underwriters:
  • This form is a tool to manage the company's exposure to catastrophic terrorism losses.
  • Verify that all TRIA-related compliance requirements have been met, including the proper offer of coverage.
  • Understand how this endorsement interacts with other policy provisions and any applicable state or federal laws.
  • When this endorsement is used, it signifies that the policy is not providing coverage for the specific peril of certified acts of terrorism, which should be reflected in the underwriting assessment and pricing if terrorism coverage was otherwise contemplated.