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What Is the Difference Between Umbrella & Excess Liability?


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Did you know that Umbrella and Excess Liability aren’t actually the same thing?

It can be confusing because they are listed together in one section on an Accord 25 COI Form, but they are, in fact, each their own policy. In this video we will explaining the difference between umbrella and excess liability

IRMI defines the umbrella liability coverage as - a policy designed to provide protection against catastrophic losses.It generally is written over various primary liability policies, such as the commercial automobile policy, CGL policy, watercraft and aircraft liability policies, and employers liability coverage.

 But what does this actually mean?

 The umbrella policy serves three purposes:

  • it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims;
  • it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims;
  • and it provides protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention.

So, the Umbrella or Excess Policy is the coverage that kicks in after we’ve run out of the commercial general liability, auto liability, or any other policy it sits on top of.

Now, you’ll hear Excess and Umbrella often used interchangeably, but they actually refer to two completely different policies that do fundamentally the same thing – with one major difference:

Specific Excess Policy: a policy written to provide additional limits of insurance to protect against losses for specified policies. In many cases this may only be one policy like the CGL. 

If the excess policy is ‘specific excess’ over the CGL, then should a claim arise on the automobile or employers’ liability policy that exhausts their limits, the excess policy will not be able to jump in and respond to these covered losses on those policies (as they are not contemplated as underlying coverage).

To remedy this, a vendor can purchase specific excess policies to cover the automobile, employer’s liability and so on.

A general excess policy sits on top, so to speak, of a number of policies, typically GL, Auto and Workers Comp.

 The big difference between an excess policy and umbrella policy, however, is that the policy, as the word implies, is ‘excess’ over the underlying insurance coverage but NOT broader than that underlying coverage.

An Umbrella Policy, in a few instances may be broader than the underlying coverage – the typically example is that an umbrella policy may ‘drop down’ and cover auto liability in a foreign country even though the commercial auto policy does not extend its territory to foreign countries. An Umbrella policy is usually written to cover excess of the CGL, automobile, and employers’ liability (part of a workers’ compensation policy) policies, but can also include other policies like foreign liability, media liability, aircraft liability and so on.

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