The Business of Layers
The Trials and Tribulations ofAccessing Excess Coverage
Carrie ScottKCIC
Ilya KostenSelman
Breitman
David CoxMorgan Lewis & Bockius
The Business of Layers
• How to access the next layer– Information that can be used–Policy language–Other influences on policy
exhaustion
Primary vs. Umbrella/Excess Coverage
• Function of primary coverage
• Function of umbrella/excess coverage
• Relationship between layers (primary and excess) and where the policyholder fits in
Loss Runs• Format–Hard copy, PDF, Electronic (e.g. Excel)
• Quality– Legibility, Structure of the file
• Level of Detail– Payments and dates, Volume
• Reporting– Legacy systems of insurers
What can a policyholder do to make sure the loss run
can be used to prove underlying exhaustion?
Loss Run
What are some things an excess insurer needs from a loss run of the underlying
policy that it typically finds lacking?
Loss Run
What strategies have you utilized when loss runs are available to use as proof of
exhaustion, but are less than perfect?
Loss Run
Policy Language
• Defense Costs–Defense not covered–Within limits– Excess of limits
• Multi-year Policy/Policy Periods < 1 Year
• Qualcomm language
How can differing defense treatments (e.g. within or in
addition to limits) of underlying policies affect
when/how excess coverage is triggered?
Policy Language
Are there ways to recover any
defense costs that the underlying policy did not
cover?
Policy Language
What issues have you encountered when a policy has a stated annual limit,
but the policy period is less than 1 year or greater than
1 year?
Policy Language
If a policyholder has a multi-year primary policy with differing aggregate
and occurrence limits, what kinds of issues might arise when trying to reach the
excess coverage?
Policy Language
Must carriers pay their full limits to trigger the next layer of coverage? What have been the effects of Qualcomm language in a
policy?
Policy Language
Supporting Impairment
• Claims Data–Source(s) of information–Data elements captured–Data consistency between
sources
• Other Consumption
What are some objections an excess insurer may have regarding the underlying
insurer’s allocation/accounting of
exhaustion?(specifically if that underlying insurer has multiple policies)
Supporting Impairment
How can a policyholder still prove exhaustion when it does not have complete claim documentation?
Supporting Impairment
Is it enough to show an allocation/billing to an insurer to qualify as
exhaustion or do you need to show insurer payments
as well?
Supporting Impairment
Settlement Agreements
• Coverage-In-Place• Cost Sharing• Structured Payment• Buy-out
What kind of issues have you seen arise when a
structured payment agreement exists in the
underlying layer?
Settlement Agreements
When a buy-out agreement is for less than the policy limit:
Do excess insurers usually require showing exhaustion of the stated policy limit?
What strategies can be used to overcome this?
Settlement Agreements
When a CIP agreement specifies an allocation methodology for billing
underlying policies, what are some issues that the excess insurers (that did not sign the agreement)
may raise?
Settlement Agreements
What types of complications might exist when the same insurer is both primary and umbrella/excess in the same
coverage block?Are there any potential
advantages?
Settlement Agreements
How can policyholders and/or insurers use
electronic data when it comes to proving underlying policy
exhaustion during trial?What are some hurdles to the use of electronic data?
Electronic Data