5/C - Umbrella and Excess Liability

Question 1

Excess Liability and Umbrella Policies

Answer 1

How can the insured add coverage to a base policy?

Excess Liability Policies

a. Follow Form
b. Stand Alone

Umbrella Policies
a. Umbrella policy carries special deductible: Self-Insured Retention (SIR)

Question 2

Coverage

Answer 2

Coverage under Excess Liability comes into effect only after limits of base policy are reached.

Question 3

Excess Liability and the Base Policy

Answer 3

Follow Form and Stand Alone Excess Liability policies rely on the base policy.

• operate only after liability limit of base policy is exhausted
• cover only what is also covered by base policy

Question 4

Follow Form Excess Liability

Answer 4

1. Follow Form: “follows” your base insurance policy to the letter.
   - Uses all the same provisions, exclusions, and coverages as the base policy
   - Easier to underwrite and less expensive than other Excess Liability policies
   - Claims tend to be simpler

Question 5

Stand Alone Excess Liability

Answer 5

2. Stand Alone Policy: Covers what base policy covers, but sets own exclusions and limitation to coverage.

The adjuster must carefully review policy provisions to ensure a loss is covered.

Question 6

Umbrella Policies: How it Works

Answer 6

Umbrella Policy

May cover risk and exposures not included in the underlying policy.

Question 7

Umbrellas Can Go It Alone

Answer 7

The Umbrella policy can operate in several ways:

• can operate like Stand Alone
• can also work as primary policy
• provides broadest coverage

Question 8

Umbrellas and Self-Insured Retention

Answer 8

Self-Insured Retention (SIR):

• a type of deductible
• equal to the limits on base policy
• but if limit of base policy is paid, this pays the SIR

Note: if a loss is not covered by base policy, insured must pay SIR out-of-pocket.