By Ken Kukral
With the litigious society in the United States, there have been terminology changes in the insurance business to better reflect the intent of coverage. A good example of this was the change from the term “All Risk” Property Coverage to “Special Form”. This was done to reduce the confusion with clients that not all risks were covered under this policy. There are numerous exclusions that reduce or eliminate coverage.
One of the areas that I believe is in need of a terminology change is the term “Umbrella Policy”. The confusion that is created by this term is that this policy provides an “umbrella” for other liability exposures the client may have. The reality is that there are very few (if any) “true umbrella” policies being offered. What clients really have is a “follow form excess liability policy”. So if they have coverage under their primary policy, they have higher limits for ONLY those coverage areas in the excess policy. There would not be a “drop down” if there was a claim that is not included in the primary coverage or if the primary insurer became insolvent.
So what term should you use with your clients? I would use the “follow form excess” term so they get the idea that all you are offering them is higher limits of coverage they have in their primary insurance program. It is important to list all policies in the follow form excess liability since they will only have higher limits for what you have listed in the schedule of underlying policies. Don’t forget employers liability (something that happens more for Ohio accounts since this is a monopolistic state and we might only be writing WC in other states on an if any basis). It is important to note that some carriers include hired & non-owned in the excess automatically (when there is underlying coverage) and some force you to list it in the underlying schedule.
One other note, check your exclusions in your follow form excess liability since they will reduce coverage that might be in the primary policy.
Us old timers need to be conscious of the changes in terminology so that clients do not get the wrong impression. When we use terms that give the impression that the coverage is more “all inclusive”, we risk an E&O claim. Details matter….