Flashcard on Commercial Umbrella & Excess Liability

Front

What is the primary purpose of umbrella and excess liability policies?

Back

To provide high limit protection above primary policies

Answer explanation

The primary purpose of umbrella and excess liability policies is to provide high limit protection above primary policies, ensuring coverage for large claims that exceed the limits of standard insurance.

Front

Which policies can umbrella and excess liability provide coverage above?

Back

Commercial General Liability (CGL)

Answer explanation

Umbrella and excess liability policies provide additional coverage above Commercial General Liability (CGL) policies, helping to protect against large claims that exceed the limits of the CGL.

Front

What does an excess liability policy NOT do?

Back

Broaden coverage

Answer explanation

An excess liability policy provides additional limits and follows the form of the underlying policy, but it does not broaden coverage. Therefore, the correct answer is that it does NOT broaden coverage.

Front

What is a key feature of umbrella liability policies?

Back

They can drop down to cover losses excluded by underlying policies

Answer explanation

A key feature of umbrella liability policies is that they can drop down to cover losses excluded by underlying policies, providing broader coverage beyond just additional limits.

Front

What does 'follow form' mean in excess liability policies?

Back

The policy matches the exact terms of the underlying policy

Answer explanation

'Follow form' means the excess liability policy matches the exact terms of the underlying policy, ensuring consistent coverage and terms between the two policies.

Front

What is a self-insured retention (SIR) similar to?

Back

A deductible

Answer explanation

A self-insured retention (SIR) is similar to a deductible because both require the insured to pay a certain amount before the insurance coverage kicks in. This means the insured retains some risk, similar to how a deductible functions.

Front

When does an umbrella policy drop down?

Back

When the underlying policy excludes the loss

Answer explanation

An umbrella policy drops down when the underlying policy excludes the loss, meaning it will cover claims that are not covered by the primary insurance. This ensures that the insured has additional protection in such scenarios.

Front

What happens if underlying limits are not maintained in an umbrella policy?

Back

The insured must pay the difference

Answer explanation

If underlying limits are not maintained, the umbrella policy will not cover the excess amount, leaving the insured responsible for paying the difference. This highlights the importance of maintaining those limits.

Front

What is a common exclusion in umbrella policies?

Back

Workers’ Compensation

Answer explanation

Workers’ Compensation is commonly excluded from umbrella policies because it is typically covered under separate insurance. This ensures that employers have specific coverage for workplace injuries.

Front

Which of the following is true about non-follow form excess liability policies?

Back

They add their own exclusions and conditions

Answer explanation

Non-follow form excess liability policies add their own exclusions and conditions, meaning they do not simply replicate the underlying policy's terms. This distinguishes them from follow form policies.