Finance 431: Property-Liability Insurance Lecture 17: Excess and Umbrella PoliciesExcess and Umbrella Liability PoliciesWhy Is This Coverage Needed?Coverage FormatsUmbrella Liability InsuranceNature of Commercial Excess Liability InsurancePossible Problem AreasExamples: Construction Company has the following policies:Loss 1: Company held liable for $1,800,000 for property damage at a worksite CGL pays $1,000,000 Umbrella pays $800,000 Loss 2: Company held liable for $300,000 for bodily injury to customer at main office CGL pays $300,000 Loss 3: Company held liable for $1,300,000 for bodily injury to passerby at a worksite CGL pays $700,000 Umbrella pays $600,000 Loss 4: Company held liable for $300,000 for bodily injury suffered by a client on a 30 foot boat when boat collides with a pier CGL pays 0 (watercraft exclusion) Umbrella pays $275,000Finance 431:Property-Liability InsuranceLecture 17:Excess and Umbrella PoliciesExcess and Umbrella Liability PoliciesPrimary policies (CGL, Auto, Homeowners)provide first layer of protectionExcess liability policyprovides coverage above limits of primary policiesUmbrella policyprovides additional limits (as excess does) and may also provide additional coverage over self-insured retentionWhy Is This Coverage Needed?Problems determining Maximum Possible Loss Layering of liability coveragePrimary insurer unwilling to provide high limitsEffect of aggregate limitsCoverage FormatsFree-Standing Umbrella Forms Self-contained policy Excess Liability FormsFollowing Forms Generally same provisions as underlying policyCombinationCoverage A - Following formCoverage B - UmbrellaSpecific excessLosses from single occurrence must exceed levelAggregate excessLosses during a specified period of time must exceed levelUmbrella Liability InsuranceProvides additional limits above each occurrenceCovers unusual losses not covered by primary insuranceProvides additional coverage when aggregate limits are exhaustedProvides additional coverage over self-insured retentionNature of Commercial Excess Liability InsuranceHigher limitsGap of buffer layer coverageLayers of coveragePossible Problem AreasConcurrencyPolicy terms must be the sameDefense costsMay be included in primary policy but treated differently by excess/umbrellaExclusions may differPollutionPunitive damagesCoverage triggers may differTail coverageAdequacy of limitsExamples:Construction Company has the following policies:CGL PolicyEach occurrence limit $1,000,000General aggregate limit $2,000,000Prod-comp. op. aggregate limit $2,000,000Umbrella PolicyEach occurrence limit $5,000,000Aggregate limit $10,000,000Self-insured retention $25,000Loss 1: Company held liable for $1,800,000 forproperty damage at a worksiteCGL pays $1,000,000Umbrella pays $800,000Loss 2: Company held liable for $300,000 for bodilyinjury to customer at main officeCGL pays $300,000Loss 3: Company held liable for $1,300,000 forbodily injury to passerby at a worksiteCGL pays $700,000Umbrella pays $600,000Loss 4: Company held liable for $300,000 forbodily injury suffered by a client on a 30 footboat when boat collides with a pierCGL pays 0 (watercraft exclusion)Umbrella pays