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Form IL 09 52: Exclusion Of Certified Acts Of Terrorism And Other Acts Of Terrorism Committed Outside The United States; Cap On Losses From Certified Acts Of Terrorism

1. What the form is

The IL 09 52 is an endorsement used in commercial insurance policies to address coverage for acts of terrorism. Its primary functions are twofold:

  • It implements the statutory cap on insurer liability for losses resulting from "certified acts of terrorism" as defined under the Terrorism Risk Insurance Act (TRIA). This cap is currently $100 billion in the aggregate for all insurers. The form clarifies that the insurance company will not be liable for losses exceeding this cap, and the U.S. Department of Treasury would manage the pro-rata distribution of settlements if the cap is breached.
  • It often serves to broaden the terrorism exclusion to specifically address "other acts of terrorism committed outside the United States" that may not fall under TRIA's definition of "certified acts of terrorism."
This endorsement is crucial for compliance with TRIA when terrorism coverage is provided to the insured. It does not, by itself, provide coverage for terrorism; rather, it modifies the terms of such coverage if it exists in the policy.

2. Classes of business it applies to

As an Interline Form (Common Policy Form), IL 09 52 is not restricted to a single line of business but can be attached to various commercial insurance policies where terrorism coverage is offered and accepted by the insured. It is commonly used with:

  • Commercial Property Coverage Part
  • Commercial Inland Marine Coverage Part
  • Equipment Breakdown Coverage Part / Boiler and Machinery
  • Farm Property (excluding farm multi-peril)
  • Standard Property Policy
Real-world examples where this form would be relevant include:
  • Owners of large commercial buildings (e.g., office towers, shopping malls, manufacturing plants) who purchase terrorism coverage.
  • Businesses with significant assets concentrated in high-profile locations or critical infrastructure sectors.
  • Companies with international operations, where the clarification regarding acts of terrorism committed outside the U.S. becomes pertinent.

3. Special considerations

Several important factors must be considered when using or encountering form IL 09 52:

  • TRIA Compliance: This endorsement is a key component of an insurer's compliance with the Terrorism Risk Insurance Act (TRIA) and its subsequent reauthorizations. TRIA requires insurers to make terrorism coverage available for commercial lines, and this form helps define the boundaries of that coverage, particularly the financial cap.
  • "Certified Acts of Terrorism": The cap on losses specifically applies to acts certified by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of Homeland Security, as acts of terrorism under TRIA. Events not meeting this certification are not subject to this specific TRIA cap, though they may be excluded or limited by other policy terms or the "other acts of terrorism committed outside the United States" wording in this endorsement.
  • Disclosure Requirements: Insurers are required to disclose to policyholders the existence of TRIA, the premium for terrorism coverage, and the $100 billion aggregate cap on liability. This form is part of that disclosure process when terrorism coverage is in effect.
  • Interaction with Other Endorsements: The IL 09 52 must be read in conjunction with the base policy and any other terrorism-related endorsements. For instance, if an insured rejects terrorism coverage, different exclusionary endorsements (e.g., IL 09 53 or IL 09 68) would typically apply. Form IL 09 60, "Exclusion Of Biological or Chemical Terrorism; Cap On Losses From Certified Acts Of Terrorism," addresses specific perils while also incorporating the TRIA cap.
  • Foreign Terrorism: The inclusion of "Other Acts Of Terrorism Committed Outside The United States" in the title and typically in the form's language clarifies the exclusionary treatment for terrorism events abroad that do not meet the TRIA certification criteria (which primarily focuses on damage within the U.S. or to specific U.S. assets abroad like certain air carriers or U.S. missions).
Real-world example: If a large-scale terrorist event is certified under TRIA and aggregate insured losses across all insurers exceed $100 billion, this endorsement would affirm that an individual insurer's policyholders might only receive a pro-rata share of their losses as determined by the Treasury Department, even if their policy limits are higher.

4. Key information for agents and underwriters

Agents and underwriters should be particularly mindful of the following when dealing with IL 09 52:

  • Application: This form is attached to policies when the insured has accepted and purchased coverage for certified acts of terrorism. It is not a standalone coverage grant.
  • Explaining the Cap: Agents must clearly explain to insureds that while they are purchasing terrorism coverage, there is a federal $100 billion aggregate limit for certified acts, which could impact their recovery in a widespread catastrophic event.
  • Risk Assessment: While the form itself doesn't alter the fundamental risk assessment for terrorism, it does provide a known boundary for insurer liability in the event of a TRIA-certified event. Underwriters should ensure it's applied consistently on policies providing terrorism coverage.
  • Coverage Scope Clarification: The endorsement helps clarify that acts of terrorism outside the U.S. that are not "certified acts" under TRIA are generally excluded. This is an important distinction for businesses with international exposures.
  • Pricing and Premiums: The premium for terrorism coverage must be separately stated and disclosed to the policyholder. While IL 09 52 doesn't dictate the premium, its presence is tied to the purchase of that coverage.
  • Regulatory Environment: Stay updated on TRIA reauthorizations and any changes in its provisions, as these directly impact the context and necessity of this endorsement.
  • Related Forms: Understand the interplay with forms like IL 02 75 (often a general policy conditions form or state-specific change form) and IL 09 60 (which provides a more specific exclusion for biological/chemical terrorism but also references the cap). Ensure the correct combination of terrorism endorsements is used based on whether coverage is accepted or rejected, and the specific scope of coverage desired.
Practical Insight: For underwriters, the IL 09 52 is a crucial tool for managing systemic risk exposure to certified acts of terrorism by contractually affirming the federal cap on losses. For agents, it's a critical piece of information to ensure clients understand both the availability of terrorism coverage and its inherent limitations under federal law.