Umbrella Liability Coverage Definitions
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 issued, 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 by contract.
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 polices 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 not 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 by 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.
UMBRELLA LIABILITY COVERAGE OUTLINE:
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 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. Also, it may be a combination of these two types of excess policies.
Umbrella policies have three functions:
- To provide additional limits above the each occurrence limit of the insured’s primary policies
- To take the place of primary insurance when primary aggregate limits are reduced or exhausted and
- 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 are comprehensive insuring agreements. 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, personal injury, and advertising injury.