Umbrella Liability
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.
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