10 Things to Know About Umbrella Coverage

1. There is no “standard” umbrella. — Christopher J. Boggs, vice president of education, Insurance Journal Academy of Insurance
2. Agents should visit the topic of excess casualty coverage with every new client and for every renewal; liability exposure multiplies along with increases in sales, payroll or additional operations. The coverage is not designed to be a luxury but to protect the client’s assets in this litigious society. — David A. Eudy, underwriting manager, Excess Casualty Center of Excellence, Burns & Wilcox
3. Umbrella/excess carriers may be unwilling to provide coverage over another insurance carrier’s employers’ liability coverage (Part II of the workers’ comp policy). — Christopher J. Boggs, vice president of education, Insurance Journal Academy of Insurance
4. Some umbrella/excess carriers won’t provide coverage over an insurance carrier rated less than “A-” by A.M. Best. Some won’t provide coverage over policies rated by other rating organizations such as Demotech. — Christopher J. Boggs, vice president of education, Insurance Journal Academy of Insurance
5. Many so-called umbrella policies today are not true umbrellas that provide broader coverage in addition to higher limits. Many, if not most, are simply excess limits forms that cover the same (sometimes less) exposures as underlying the policies. They often incorporate underlying exclusions by reference and may add their own exclusions or restrictions (e.g., for fire damage legal liability or UM claims). —Ed Scheinuk, senior vice president, BancorpSouth
6. Many contracts, particularly in the construction industry, call for “following form” umbrella or excess coverage. It is increasingly the rare excess policy that covers everything covered by the underlying policies…many of them introduce exclusions or limitations not in the underlying forms. — Bill Wilson, associate vice president, Education & Research, IIABA
7. The umbrella/excess “horizontal vs. vertical exhaustion” issue is becoming increasingly problematic. Some insurers use an umbrella/excess endorsement that changes horizontal to vertical integration for additional insureds. — Chuck Schramm, David Sanborn, and Bill Wilson, associate vice president, Education & Research, IIABA
8. Identifying who is an insured under an umbrella/excess policy can be difficult and dangerous. Some forms may limit coverage solely to named entities or extend coverage only to majority owned affiliates. — Jim Mahurin, risk management consultant
9. Failure to report underlying claims to the umbrella/excess carrier can result in a lack of coverage if a settlement or judgment exceeds the underlying policy limits. — Jim Mahurin, risk management consultant, and Bill Wilson, associate vice president, Education & Research, IIABA
10. One of the biggest E&O threats to agents when they write excess or umbrellas for both personal and commercial customers is failing to tell the insureds that neither their umbrella nor excess will go over UM or UIM. The perception that the umbrella/excess policies provide excess limits is wrong with very rare exceptions. — Laurie Infantino, president, Insurance Community Center