Commercial umbrella insurance and excess insurance are great because these two types of policies provide additional liability limits over and above the underlying General Liability policy, Auto Liability policy, and Worker’s Compensation policy. Sometimes these policies can be endorsed to extend above other policies but these are the three main policies.
The marketplace tends to be very confusing when it comes to Excess Liability and Umbrella Liability policies as many times the words are used interchangeably and technically these two policies while very similar, but can be very different. Both the umbrella and excess policy may or may not have self-insured retention limits. This is basically a deductible, usually referred to as SIR, self-insured retention. If the policy has this deductible usually it is $10,000.
All things being equal, if that is even possible, the umbrella policy is normally always broader in coverage in scope than the excess policy. The excess policy usually states that it is a following form. That means that the excess policy has the exact same coverage as the primary general liability policy. So, if the primary liability policy has coverage’s and exclusions and limitations the excess policy will have those same coverage’s exclusions and limitations within the excess limits that are being offered. Sometimes the excess policy can be written so that it is a self-contained policy. This means that the excess policy contains with in its own policy contract provision for its own limitations, coverage’s and exclusions. That can be very confusing for the consumer to try to meld together a primary liability policy and excess liability policy that has inherent different exclusions, coverage’s and limitations. Sorting all that out at claim time can be extremely dangerous and resulting in gaps of coverage’s A true umbrella policy can sometimes drop down to the self-insured retention limit to pick up some liability claims that might not be covered in the primary liability policy.
Most policies in the marketplace today are written on an excess basis and not on the true umbrella bases. As a consumer, it would be wise to make the assumption that even if the verbiage says umbrella policy that it probably is more likely to be an Excess policy that follows the underlying primary liability policies coverage, limits, and exclusions.
Usually these umbrella and excess policies having an insuring agreement that promises to pay the “ultimate net loss” that exceeds the underlying limits for the primary liability policy. It is important to identify within the policy for verbiage as to how the carrier defines ultimate net loss. Usually it is the insured’s legal liability in totality for a claim that is covered and it may or may not include defense cost within the limits. Excess and Umbrella policies are typically written on and an occurrence type bases which means it is triggered from an accident that includes the continuous or route repeated exposure to basically the same harmful conditions or events. Sometimes the coverage might be exhausted on the primary policy with regards to the defense cost. The umbrella and/or excess policy might drop down provide more defense coverage limits but not necessarily pay for damages.
It is very important that the umbrella and excess policies are concurrent with the primary liability policy. This means they both should have the same effective and expiration date. This can cause gaps in coverage if they have different start and finish dates. All policies have coverage territory limits and exclusions. It’s important to reconcile that the primary liability policy and the umbrella/excess policies have the same coverage territory provisions.
As the insured, it would be prudent to know in advance whether you have an excess policy or an umbrella policy in your portfolio. Making sure that your underlying and excess/umbrella policies are concurrent on the policy dates is also of extreme importance. Finally, making sure that both the primary and the excess/umbrella policies have complementary coverage’s, exclusions, and limitations will prevent gaps in coverage.