Form IL 02 80: Exclusion - War, Military Action And Terrorism
1. What the form is
Form IL 02 80, titled "Exclusion - War, Military Action And Terrorism," is a standard insurance policy endorsement that serves to eliminate coverage for losses or damages resulting from acts of war, specific military actions, and certain types of terrorism. Its primary function is to clearly define the boundaries of coverage by explicitly stating that perils of this nature are not insured under the policy to which it is attached. This exclusion is broadly applied across various property and liability insurance policies. It's important to note that the impact of this exclusion can sometimes be modified by other endorsements, particularly those related to the Terrorism Risk Insurance Act (TRIA), which may reinstate some coverage for certified acts of terrorism.
2. Classes of business it applies to
This exclusion is an interline form, meaning it can be used across multiple lines of insurance, including both commercial and personal lines. It is commonly found in:
- Commercial Property Policies: Protecting buildings, contents, and business income from losses due to war or terrorism. For example, a manufacturing plant damaged during a military conflict would likely find coverage excluded under this form.
- Commercial General Liability (CGL) Policies: Excluding liability claims arising from war or terrorism. For instance, if a business is sued for injuries occurring on its premises as a direct result of a terrorist attack, this exclusion would likely apply.
- Inland Marine Policies: Covering movable property or specialized equipment. If a piece of construction equipment is destroyed in a war zone, this exclusion could negate coverage.
- Businessowners Policies (BOPs): Which combine property and liability coverage for small to medium-sized businesses.
- Homeowners and Personal Auto Policies: While less commonly the primary focus of discussion for this specific form number in commercial contexts, similar war exclusions are standard in personal lines policies as well.
The universal applicability of this form means it can impact virtually any business or individual holding a property or casualty insurance policy.
3. Special considerations
Several important factors should be considered regarding Form IL 02 80:
- TRIA and Related Endorsements: The Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations have a significant interplay with this exclusion. TRIA established a federal backstop for insurance losses resulting from certified acts of terrorism. Insurers are generally required to offer terrorism coverage, and if the insured accepts and pays the premium for it, endorsements may be added to the policy that modify or supersede parts of IL 02 80, specifically for "certified acts of terrorism." However, the core exclusion for war and military action typically remains.
- Definition of "Terrorism": The definition of what constitutes "terrorism" can be complex and may vary. Policies will often define the term, and whether an event falls within this definition (and thus the exclusion) can be a point of contention. The TRIA framework also has specific criteria for an event to be certified as an act of terrorism by the Secretary of the Treasury.
- "Warlike Action" Scope: The exclusion is broad and encompasses not just declared wars but also "warlike action by a military force," including actions to hinder or defend against an attack. This can include civil war, insurrection, rebellion, or revolution.
- State Variations and Approvals: While this is a standard form intended for use in all states, state insurance regulators may have specific rules or have approved state-specific versions or amendments to terrorism-related exclusions. For example, some states initially did not approve certain terrorism endorsements following 9/11.
- Related Form IL 02 75: The prompt mentions IL 02 75 as a related form. This form, "Texas Changes - Cancellation and Nonrenewal Provisions for Casualty Lines and Commercial Package Policies," amends cancellation and nonrenewal conditions and is required by Texas law. While not directly modifying the war and terrorism exclusion itself, it's part of the broader regulatory landscape affecting policy terms.
A real-world example of a special consideration would be a business operating in a region with political instability. Such a business would need to pay close attention to this exclusion and any available TRIA-related buy-back options, understanding that losses from civil unrest or military action might not be covered.
4. Key information for agents and underwriters
Agents and underwriters should be mindful of the following:
- Coverage Gaps: This exclusion creates a significant coverage gap for catastrophic events. Agents must clearly communicate the limitations imposed by this exclusion to their clients. It's crucial for insureds to understand that losses from war, most military actions, and non-certified acts of terrorism are generally not covered.
- TRIA Offerings: Agents must be diligent in offering TRIA coverage as required by law and explaining its benefits and limitations. Underwriters need to assess the potential aggregation of risk if TRIA coverage is accepted, especially for businesses in high-profile locations or industries.
- Risk Assessment: For underwriters, assessing the risk of war or terrorism for a particular insured is challenging due to the unpredictable nature of such events. However, factors like geographic location, industry type (e.g., critical infrastructure, iconic properties), and the insured's own security measures might be considered, although this exclusion generally applies regardless of these factors.
- Pricing: The premium for buy-back endorsements related to TRIA will vary. Underwriters will price this based on their assessment of the terrorism risk. The base premium for the policy reflects that war and most terrorism risks are excluded.
- Clarity of Language: While a standard form, ensuring the client understands the implications of terms like "war," "military action," and "terrorism" (as defined in the policy and relevant statutes) is paramount to avoid disputes at the time of a claim.
- Workers' Compensation Exception: It's noteworthy that workers' compensation is generally an exception and typically *does* cover injuries or deaths of employees arising from acts of war or terrorism if they occur in the course and scope of employment. This is a separate line of coverage not directly amended by IL 02 80, but important context for overall risk management.
For example, an underwriter for a policy on a large commercial building in a major city will confirm IL 02 80 is attached. The agent should then discuss with the client the option to purchase terrorism coverage under TRIA, explaining that this would provide some financial protection if a certified act of terrorism occurs, but that the broader war and military action exclusion would still largely apply.