Study 2 - Broadening and Increasing Coverage Flashcards
Excess Insurance
Insurance that does not participate until all other similar insurance on the same subject is exhausted, or until the loss exceeds a previously agreed-upon amount.
Excess insurance usually provides the same coverage as the primary policies with a cushion of limits at a higher level
Umbrella Policy
A special form of liability policy designed to protect the insured for certain unknown contingencies over and above other coverages and to provide excess insurance
Following Form Excess Liability Insurance
Excess Liability Insurance subject to the terms and conditions of the primary policy
3 Main Functions of an Umbrella Policy
- Provides excess limits of insurance over underlying policies
- Provides additional coverage beyond underlying policies, which is often subject to a self-insured retention (SIR)
- Provides an aggregate drop-down feature that “drops down” to cover losses when the underlying policy aggregate has been exhausted (which is not usually subject to an SIR)
Self Insured Retention
A dollar amount specified in an insurance policy (usually a liability policy) that must be paid by the insured before the insurance policy will respond to a loss
Drop-down coverage
A clause in umbrella policies providing that the umbrella will “drop down” over reduced or exhausted underlying policy aggregate limits. Some umbrellas maintain their own coverage terms when they drop down; others assume those of the primary policy.
Comes into effect when a loss is excluded by the primary policy but covered under the umbrella policy
Broader Coverage under Umbrella Policies
Typically in the following areas:
- Advertising activities of the insured
- Property leased or occupied by the insured
- Personal property in the care, custody, or control of the insured
- Aviation liability
- Marine liability
- Full worldwide territorial cover
- Employers liability
When the SIR applies
The SIR generally only applies when a loss is not covered under the primary general liability policy and the umbrella policy drops down to respond to the loss
Rating/Pricing Umbrella Policies
The premium for umbrella policies are usually a percentage of the underlying premiums. Premium charges for excess policies are typically lower than umbrella policies.
Applications
Will typically identify:
- Primary insurers
- Outline the scope of coverage on underlying policies (including policy terms and limits of liability)
- Determine the risks insured
- Discern possible claims that would not be covered by the underlying policies (but covered by the umbrella policy)
- Determine who should be named as insureds
Concurrent Policy Periods
Should be considered, especially when an underlying policy contains an aggregate feature.
If such a primary policy experiences a number of claims and, as a result, has a reduced aggregate limit, the umbrella policy will be affected.
Who needs Umbrella Coverage?
- Products Recall (typically no coverage under CGL)
- Insureds who advertise (typically extended to a CGL policy or covered by an umbrella policy)
- Contractors
- Owners of Public Facilities
Advertiser’s Liability Insurance
Coverage protecting an insured against claims for libel, slander, defamation, infringement of copyright, invasion of privacy, etc. arising out of its advertising program. Also available for radio and television stations and advertising agencies.
