1. Forms
2. IL
3. IL-09-97

What the Form Is

The IL 09 97, titled "Conditional Limitation Of Coverage For Terrorism - Sub-Limit On Annual Aggregate Basis (Relating To Disposition Of Federal Terrorism Risk Insurance Act)", is an insurance policy endorsement. Its primary function is to address coverage for losses arising from acts of terrorism, specifically those certified under the Terrorism Risk Insurance Act (TRIA). This endorsement introduces a sub-limit on the amount of coverage available for such events on an annual aggregate basis. Crucially, the way this endorsement operates is conditional upon the status of TRIA. If TRIA is in effect, the sub-limit applies to covered terrorism losses. However, if the TRIA program were to terminate or be significantly altered, the endorsement contains provisions that could then exclude or further limit terrorism coverage.

Classes of Business It Applies To

This endorsement is typically used with various commercial lines of insurance. It can be attached to policies covering risks such as:

• Commercial Property
• Commercial General Liability
• Commercial Auto
• Other commercial policies where terrorism risk is a concern and TRIA applicability is a factor.

Real-world example: A large commercial property owner with a portfolio of buildings in major urban centers might have this endorsement attached to their property policy. If a certified act of terrorism damages one of their buildings, the coverage for that loss would be subject to the sub-limit specified in this endorsement, and also to the overall terms and conditions of TRIA, including the $100 billion industry aggregate cap.

Special Considerations

• TRIA Dependency: The most significant consideration is the direct link to the federal Terrorism Risk Insurance Act. The endorsement's terms regarding the sub-limit or potential exclusion are contingent on TRIA being in force, renewed, or allowed to expire. Policyholders and insurers must stay informed about the current status of TRIA.
• Sub-Limit Application: When TRIA is active, this endorsement imposes an annual aggregate sub-limit for covered terrorism losses. This means the insurer's liability for all certified terrorism losses under the policy during a policy year will not exceed this specified sub-limit, regardless of the number of events.
• Conditional Exclusion: If TRIA is terminated, the exclusionary language within the endorsement may become operative, potentially removing coverage for acts of terrorism that would have otherwise been covered or sub-limited.
• Interaction with other Terrorism Endorsements: It's often used in conjunction with other terrorism-related endorsements, such as IL 09 87 (Limitation Of Coverage For Certified Acts Of Terrorism - Sub-Limit On Annual Aggregate Basis). The specific combination of forms will dictate the overall terrorism coverage.

Real-world example: If TRIA were to expire without renewal, a business with IL 09 97 on its policy might find that the endorsement shifts from providing sub-limited coverage to excluding terrorism losses, depending on the specific wording triggered by TRIA's disposition.

Key Information for Agents and Underwriters

• Clear Communication: Agents must clearly explain to insureds how this endorsement works, particularly its conditional nature based on TRIA and the application of the sub-limit. Misunderstanding its function could lead to significant coverage gaps.
• Risk Assessment: Underwriters need to assess the terrorism exposure of the risk being insured. The decision to use this endorsement, and the specific sub-limit offered, will depend on the nature of the risk, its location, and the insurer's underwriting guidelines for terrorism coverage.
• TRIA Compliance: Insurers must ensure that their use of this and related terrorism endorsements complies with the requirements of TRIA, including disclosure and offer provisions.
• Pricing Considerations: The premium charged for terrorism coverage, even if sub-limited by this endorsement, should reflect the insurer's assessment of the risk and the potential exposure under TRIA.
• Coverage Gaps: Agents should discuss potential coverage gaps, especially how the definition of "certified acts of terrorism" and the TRIA program cap of $100 billion might affect the insured's recovery.