Excess and Umbrella Liability Policies Primary policies (CGL, Auto, Homeowners) provide first layer of protection Excess liability policy provides coverage above limits of primary policies Umbrella policy provides additional limits (as excess does) and may also provide additional coverage over self-insured retention

Why Is This Coverage Needed? Problems determining Maximum Possible Loss Layering of liability coverage Primary insurer unwilling to provide high limits Effect of aggregate limits

Coverage Formats Free-Standing Umbrella Forms Self-contained policy Excess Liability Forms Following Forms Generally same provisions as underlying policy Combination Coverage A - Following form Coverage B - Umbrella Specific excess Losses from single occurrence must exceed level Aggregate excess Losses during a specified period of time must exceed level

Umbrella Liability Insurance Provides additional limits above each occurrence Covers unusual losses not covered by primary insurance Provides additional coverage when aggregate limits are exhausted Provides additional coverage over self-insured retention

Limits of Liability for Umbrella Policies Losses covered by primary insurance and umbrella Losses not covered by primary insurance but are covered by umbrella Losses not covered by either primary insurance or umbrella Losses involving underlying aggregate limits

Nature of Commercial Excess Liability Insurance Higher limits Gap of buffer layer coverage Layers of coverage

Possible Problem Areas Concurrency Policy terms must be the same Defense costs May be included in primary policy but treated differently by excess/umbrella Exclusions may differ Pollution Punitive damages Coverage triggers may differ Tail coverage Adequacy of limits

Examples: Construction Company has the following policies: CGL Policy Each occurrence limit$1,000,000 General aggregate limit$2,000,000 Prod-comp. op. aggregate limit$2,000,000 Umbrella Policy Each occurrence limit$5,000,000 Aggregate limit $10,000,000 Self-insured retention $25,000

Loss 1: Company held liable for $1,800,000 for property damage at a worksite CGL pays $1,000,000 Umbrella pays $800,000 Loss 2:Company held liable for $300,000 for bodily injury to customer at main office CGL pays $300,000 Loss 3:Company held liable for $1,300,000 for bodily injury to passerby at a worksite CGL pays $700,000 Umbrella pays $600,000 Loss 4:Company held liable for $300,000 for bodily injury suffered by a client on a 30 foot boat when boat collides with a pier CGL pays 0 (watercraft exclusion) Umbrella pays $275,000