AAIS introduces standard commercial umbrella/excess policy

AAIS introduces standard commercial umbrella/excess policy

The American Association of Insurance Services introduced the industry’s first standard program for writing umbrella and excess liability coverage for commercial accounts. The program features a base policy and 35 endorsements filed countrywide on an advisory basis, along with sample rules and rating information that insurers can adapt for their particular market needs. The form can be written over any underlying commercial liability policy, whether written by AAIS or not.

The AAIS policy addresses the sometimes conflicting expectations of insureds who want “drop-down” coverage for unanticipated exposures and reinsurers that want to minimize the possibility of such exposures. To deal with this situation, the form designates two coverages:

Coverage E (excess), which provides excess coverage above required limits for policies listed on a schedule of underlying insurance; and

Coverage U (umbrella), which provides drop-down coverage for premises/operations and products/completed work claims not addressed or expressly included in the underlying commercial general liability policy.

Coverage E follows the form of the scheduled underlying policies by stating that “the terms, definitions, conditions, and exclusions of underlying insurance govern the coverage provided.” If, for example, an insured has no watercraft liability policy, there would be no coverage for watercraft liability under Coverage E.

Similarly, Coverage U excludes coverage for claims covered under monoline liability policies or CGL endorsements (autos, aircraft, employers liability, etc.), as well as claims expressly excluded in the underlying CGL policy. Coverage U also features “absolute” exclusions for potentially catastrophic pollution and lead liability claims, as well as standard exclusions for intentional acts and other causes of loss.

Copyright Rough Notes Co., Inc. Sep 2000

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