Excess and Umbrella Liability PoliciesPrimary 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 FormatsFree-Standing Umbrella Forms

Self-contained policy Excess Liability Forms

Following Forms Generally same provisions as underlying policy

CombinationCoverage A - Following formCoverage B - Umbrella

Specific excessLosses from single occurrence must exceed level

Aggregate excessLosses 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 AreasConcurrency

Policy terms must be the sameDefense costs

May be included in primary policy but treated differently by excess/umbrella

Exclusions may differPollutionPunitive damages

Coverage triggers may differTail coverageAdequacy 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 forproperty damage at a worksiteCGL pays $1,000,000Umbrella pays $800,000

Loss 2: Company held liable for $300,000 for bodilyinjury to customer at main officeCGL pays $300,000

Loss 3: Company held liable for $1,300,000 forbodily injury to passerby at a worksiteCGL pays $700,000Umbrella pays $600,000

Loss 4: Company held liable for $300,000 forbodily injury suffered by a client on a 30 footboat when boat collides with a pierCGL pays 0 (watercraft exclusion)Umbrella pays $275,000