the Virtues of excess
how much can Your client afford to lose?
Consider the example of a banquet hall filled to capacity when a fire breaks out, destroying the building and resulting in the injury or death of patrons. the owner’s general liability coverage has limits of $1 million per occurrence and $2 million aggregate; however, during the investigation it is determined that the banquet hall
had numerous fire code violations and a verdict of $5 million is awarded to the claimants.
In situations such as these, a
business not protected by Excess or
Umbrella Coverage would potentially face financial ruin on top of an
already tragic incident. While Excess
or Umbrella policies do not replace
primary General Liability Coverage,
they do supplement its protection by
offering additional limits that exceed
those of the primary policy.
Michael Vought, Managing
Director of Markel Corp. in Red
Bank, N.J., warns, “Almost any busi-
ness, regardless of their operations,
has an exposure to significant losses.
Umbrella or Excess Coverage is a
product every business should pur-
chase. Every business needs to protect
their assets from a liability standpoint.
Not doing so can lead to disaster.”
Though similar in nature, Excess
and Umbrella policies serve two dis-
tinctive functions for a business owner.
Umbrella policies usually offer broader
coverage than Excess policies and
provide coverages over several under-
lying policies such as General Liability,
Business Auto, Liquor Liability, and
Employers Liability. They also fea-
ture a self-insured retention, which
acts similarly to a deductible but only
applies to uncovered primary losses
before the umbrella starts paying. For
example, when a General Liability
policy for a shopping center does not
cover an assault and battery loss, the
self-insured retention is applied and
then the Umbrella policy responds,
unless it excluded assault and battery.
It also pays for defense costs in addition to policy limits.
On the other hand, Excess Coverage
acts as an extension of the underlying
policy and provides increased limits once
that policy has been exhausted. It serves
as added protection only for items covered by the primary policy, “following
the form” of that policy, so to speak. If
the underlying policy does not provide
coverage, neither does the Excess policy.
It strictly tracks the coverage provisions
of the primary policy when providing
additional limits but does not include a
self-insured retention.
Cornering the Market
Subtle differences between the policies can be confusing to even the most
seasoned insurance agent or broker.
As Tom Ryder, Director of Excess
Casualty at Burns & Wilcox explains,
“I was a retail agent for 25 years
and know that Excess and Umbrella
Excess vs Umbrella:
Excess Insurance:
provides increased limits protection
“follows the form” of the underlying
scheduled policies, literally tracking
coverage provisions of primary policies
while providing additional limits
features limits that are applied in
a manner consistent with primary
policies. for example, additional insured
coverage, waivers of subrogation, and
per-location aggregates are available
pays for defense costs in addition to or
outside policy limits
has no self-insured retention
Coverage can be confusing. Some
agents don’t broach the subject with
their insured because they are unsure
of the answers to their questions. And
that’s what we are here for: to educate
and to inform.”
There are obvious challenges asso-
ciated with marketing a product often
misunderstood by retail agents, but
with complexity comes opportunity.
Though some agents remain reluctant
to invest the time and effort needed
to converse fluently with commercial
clients and prospects about excess
casualty products, those who have
committed to doing so are positioning
themselves to tap into a potentially
lucrative segment of the market.
“We’ve definitely been growing,”
says Tom Ryder. “Last year, we wrote
4,800 Excess and Umbrella policies.
I think agents are recognizing that
we have good products and excellent
service.” In fact, in the last five years,
Umbrella Insurance:
overlays most of a firm’s primary
coverage program with increased limits
attaching over each of the policies
generally offers broader coverage —
more than underlying primary policies
features expanded worldwide
coverage territory
generally provides greater and more
comprehensive protection
pays for defense costs in addition to
or outside policy limits
has optional self-insured retention
