1. Forms
2. IL
3. IL-09-87

What the form is

The IL 09 87, titled "Limitation Of Coverage For Certified Acts Of Terrorism (Sub–Limit On Annual Aggregate Basis)", is an insurance policy endorsement designed to modify coverage for losses resulting from "certified acts of terrorism" as defined by the Terrorism Risk Insurance Act (TRIA). Its primary function is to establish a specific sub-limit for such losses, which applies on an annual aggregate basis. This means that the amount the insurer will pay for all certified terrorism losses during a policy year will not exceed the sub-limit stated in the endorsement's schedule, regardless of the number of events or the overall policy limits for other types of losses. This endorsement is attached to policies where terrorism coverage is provided and helps manage the insurer's exposure to large-scale terrorism events.

Classes of business it applies to

This endorsement is broadly applicable to various commercial lines of insurance where terrorism coverage is offered or purchased. This includes, but is not limited to:

• Commercial Property Coverage Parts
• Commercial Inland Marine Coverage Parts
• Boiler and Machinery / Equipment Breakdown Coverage Parts
• Farm Coverage Parts
• Standard Property Policies

Real-world example: A large commercial property owner with multiple buildings might have a multi-million dollar property policy. If they opt for terrorism coverage, the insurer might attach the IL 09 87 to cap the payout for certified terrorism events at a specific, lower aggregate amount (e.g., $5 million) for the policy year, even if the total property values are much higher. This helps the insurer manage its potential losses from a widespread terrorist attack affecting multiple insured locations.

Special considerations

Key considerations for the IL 09 87 include:

• TRIA Compliance: This form is closely tied to the provisions of TRIA, which requires insurers to make terrorism coverage available. The definition of a "certified act of terrorism" is critical and relies on certification by the Secretary of the Treasury.
• Scheduled Sub-Limit: The actual monetary limit is not in the form itself but must be specified in the schedule of the endorsement or the policy declarations. This sub-limit is an annual aggregate.
• Fire Exception: The endorsement includes a schedule where states that have a "fire exception" can be listed. In some states, statutes may not permit the exclusion of fire damage even if caused by a terrorist act. This needs careful review based on applicable state laws.
• Interaction with other TRIA forms: It's one of several endorsements used to address terrorism risk. For example, it might be used in conjunction with forms that disclose TRIA provisions or other terrorism-related exclusions or limitations like IL 09 97 (Conditional Limitation Of Coverage For Terrorism - Sub-Limit On Annual Aggregate Basis).
• Policy Expiration and TRIA Reauthorization: The applicability and wording of terrorism endorsements can be affected by the status of TRIA reauthorization. The IL 09 87 01 15 is designed for use when TRIA is in effect.

Real-world example: If an insured business operates in a state with a statutory fire exception for terrorism, the IL 09 87 schedule would need to reflect this, potentially meaning that fire damage resulting from a certified act of terrorism might be covered up to the main policy limits, while other types of damage from the same event are subject to the IL 09 87 sub-limit.

Key information for agents and underwriters

• Risk Assessment: Underwriters must assess the terrorism exposure of the insured (e.g., location, industry, iconic status of property) to determine an appropriate sub-limit if this endorsement is used.
• Pricing: The premium charged for terrorism coverage will reflect whether and how coverage is limited, such as by an aggregate sub-limit through the IL 09 87.
• Coverage Clarity: Agents must clearly explain to insureds how this endorsement limits their terrorism coverage, particularly the concept of an annual aggregate sub-limit and how it interacts with the overall policy limits and any state-specific fire exceptions.
• Documentation: Proper documentation of the offered terrorism coverage and any accepted limitations, including the specific sub-limit on the IL 09 87, is crucial.
• Aggregate Monitoring: For insurers, tracking aggregate exposures under forms like IL 09 87 is important for managing overall portfolio risk related to terrorism.
• Relation to IL 09 52: The IL 09 87 is similar to the IL 09 52 (Cap on Losses from Certified Acts of Terrorism), but the IL 09 87 specifically introduces sub-limits for the coverage part(s) indicated on its schedule, whereas IL 09 52 generally refers to the $100 billion program cap under TRIA.