15 - 1Copyright 2008, The National Underwriter Company Commercial Umbrella Liability Insurance Usual features and provisions Introduction Provides excess

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 15Risk Management For Financial Planners


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




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




ISO form (cont’d) 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




ISO form (cont’d) 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




ISO form (cont’d) Conditions

Premium audit clause Cooperation in settlements Maintain scheduled underlying insurance Appeals clause Other common CGL clauses




Advantages Net effect of providing insured with “umbrella” of blanket

catastrophic liability protection at relatively small cost in premium

Many or most of business entity’s liability exposures transferred

Insured can have policy written to suit its risk exposures Umbrella policy assumes defense and indemnification

when underlying insurance is exhausted




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



Documents

15 - 1Copyright 2008, The National Underwriter Company Commercial Umbrella Liability Insurance Usual features and provisions Introduction Provides excess