Umbrella liability insurance provides excess
liability coverage over several of the insured's
primary liability policies. Most umbrella
liability policies provide coverage that is
broader than the insured's primary policies.
An excess liability policy may be what is
called a following form policy, which means
it is subject to the same terms as the underlying
policies; it may be a self-contained policy,
which means it is subject to its own terms
only; or it may be a combination of these
two types of excess policies. Umbrella policies
have three functions: (1) To provide additional
limits above the each occurrence limit of
the insured's primary policies; (2) To take
the place of primary insurance when primary
aggregate limits are reduced or exhausted;
and (3) To provide broader coverage for some
claims that would not be covered by the insured's
primary insurance policies, which would be
subject to the policy retention. Most umbrella
liability policies contain one comprehensive
insuring agreement. The agreement usually
states it will pay the ultimate net loss,
which is the total amount in excess of the primary limit for which the insured becomes
legally obligated to pay for damages of bodily
injury, property damage, personal injury,
and advertising injury.
Limits of Insurance
All umbrella liability policies contain
an each occurrence limit of insurance. Some
umbrella liability policies may have a separate
limit that applies to all personal and advertising
injury for one person or for the organization.
Also, some policies are written with aggregate
limits for only one type of loss. Other
policies may have one or more aggregates
for all losses. Umbrella policies can be
written with several different variations
of the aggregate limits. There are no standard
umbrella policies.
Pay on Behalf
This is an insuring agreement used in some
umbrella policies. The agreement promises
to make direct payment on behalf of the
insured for those sums of money the insured
becomes legally obligated to pay because
of liability imposed upon the insured by
law, or assumed under contract.
Indemnity
This is the insuring agreement clause found
in most umbrella policies as opposed to
the pay on behalf agreement. When the indemnity
insuring clause is used, the insurer will
indemnify or reimburse the insured for those
sums of money the insured becomes obligated
to pay by reason of liability imposed upon
the insured by law, or assumed under contract.
Self Insured Retention
The self insured retention is the amount
of the loss an insured must pay before the
umbrella policy would be required to respond.
The self insured retention would only apply
when a loss is excluded from coverage under
the primary policy, but not excluded under
the umbrella policy.
Required Underlying Limits
Required Underlying Limits is a requirement
of the insurer. It requires the insured
to have certain types and amounts of primary
insurance before the umbrella policy can
be written.
|
Umbrella Liability Coverage Outline