15 - 1Copyright 2008, The National Underwriter Company Commercial Umbrella Liability Insurance Usual features and provisions Introduction Provides excess coverage over other liability insurance Provides coverage for uninsured liability exposures Provides replacement coverage for underlying liability policies reduced or exhausted by loss Chapter 15 Risk Management For Financial Planners

15 - 2Copyright 2008, The National Underwriter Company Variety in umbrella forms ISO has introduced a standard form, but umbrella liability policies are mostly not prescribed by any rating or advisory agency Policies may differ in many respects Definition of who is insured Coverage territory Limitations or restrictions on coverage Sublimits and use of aggregrate limits Pay on behalf versus reimbursement insuring agreements Definition of bodily injury or personal injury Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 3Copyright 2008, The National Underwriter Company ISO form Insuring agreement First insuring agreement offers payment for the ultimate net loss in excess of the retained limit for bodily injury or property damage Occurrence basis, anywhere in world Second agreement applies to personal and advertising injury liability Persons insured Includes individuals, partnerships, joint ventures, limited liability companies, and other organizations Includes any executive, officer, employee, director, or stockholder of the named insured acting in his official capacity Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 4Copyright 2008, The National Underwriter Company ISO form (contd) Limits of insurance Aggregate limit Each occurrence limit Personal and advertising injury limit Ultimate net loss in excess of retained limit Definitions Just about all the terms that appear on the ISO CGL form Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 5Copyright 2008, The National Underwriter Company ISO form (contd) Exclusions Exclusions that appear on CGL form such as expected or intended, contractual, liquor liability, and workers compensation Modified with respect to auto liability exposure, aircraft and watercraft remain Exclusions pertinent to umbrella policy ERISA Employment-related practices Professional services Two sets of exclusions for two insuring agreements Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 6Copyright 2008, The National Underwriter Company ISO form (contd) Conditions Premium audit clause Cooperation in settlements Maintain scheduled underlying insurance Appeals clause Other common CGL clauses Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 7Copyright 2008, The National Underwriter Company Advantages Net effect of providing insured with umbrella of blanket catastrophic liability protection at relatively small cost in premium Many or most of business entitys liability exposures transferred Insured can have policy written to suit its risk exposures Umbrella policy assumes defense and indemnification when underlying insurance is exhausted Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance

15 - 8Copyright 2008, The National Underwriter Company Disadvantages Premium not available for other business uses Possibility for disputes between underlying insurer and umbrella insurer Umbrella liability policy does have exclusions; it is not all risk, open perils coverage Usually no duty for umbrella insurer to provide drop down coverage if underlying insurer becomes insolvent Chapter 15 Risk Management For Financial Planners Commercial Umbrella Liability Insurance