Layering Excess Liability-What you need to know

December 14, 2016

Excess liability insurance provides additional protection that supplements a company’s existing single policy coverage. In an excess casualty program there are several layers of coverage that build upon each other. For example, an umbrella policy and multiple excess policies may be necessary in order to achieve the desired amount of insurance protection.

Provisions to look for in an excess liability policy:

There are three particular excess casualty policy provisions that have been known to cause claim disputes. Make sure to discuss these with your broker.

  • Duty to defend. In most cases, an insurer is obligated to defend an insured if a loss could potentially be covered under a specific policy it underwrites, even if there is a question of whether the claim is valid. However, this is not standard across all excess casualty policies. Make sure the excess policy includes a duty to defend clause or the insured could be left without defense costs coverage beyond the lead umbrella layer.
  • Restrictive as underlying provisions. Some excess policies include the same restrictions as the layer immediately below. If an underlying policy adds an exclusion, any upper layers will follow that same exclusion.
  • Negotiated partial settlements. Excess policies generally are not triggered until the layer below is fully exhausted by actual payment of claims. A negotiated partial settlement provision will allow the underlying limits to be exhausted with a combination of payments made by the insurer and insured thereby triggering the next layer of coverage. For example, in the case of a coverage dispute.

Contact The Armstrong Company Insurance Consultants for assistance with any insurance question, including Excess Liability Insurance and one of our experienced licensed representatives will provide you with the information you need. We are here to be of service!

The Armstrong Company Insurance Consultants  (License #0440075)