umbrella underlying limits

[wariline]

It depends. If the umbrella does not require the insured to maintain an underlying GL policy for this bldg (which is highly unlikely), then the insured has 100k retention in your case. If the umbrella requires the insured to maintain an underlying, typically 1MM for commercials, then the insured's retention is 1MM, instead of the 100k retention shown on the umbrella decl. In addtion, some carriers might decline any coverage if the bldg is not properly scheduled.

[azcompanyman]

An umbrella policy is written and intended to be excess over a primary policy - GL, AL, EL. I don't know why any carrier would write an umbrella policy without proof of primary coverage in place and properly scheduled on the policy. One could assume that the client had GL in place when coverage was placed and then let that policy lapse. This is when the requirement to maintain primary coverage provision of the policy would come into play as wariline suggested. First, however, you need to determine if the client has a true umbrella policy that would "drop down" at all. Umbrella is a term that is used broadly, but many policies written are actually pure excess forms and do not provide any drop down coverage no matter the situation.

[mccluney]

You sure cannot guess the carrier's response as there in no such thing as a "standard umbrella or excess liability" policy. Read the policy and you will find the answer. I can't help but to wonder how the agent permitted the policy to be written without underlying coverage?

[LadyBroker]

It's not maybe that the agent allowed it to be written with no underlying GL, what do you do if the client lets the GL lapse during the policy term, and doesn't tell you? AND - as a wholesaler, I don't normally write the underlying GL policies, so I am dependent on my retailers to advise if the underlying changes, or cancels, or whatever could happen.

[mccluney]

If I am the retail agent, I will write a letter to my client to explain what would happen if an underlying policy is cancelled. The repercussions would be made clear if the client is not in compliance with the requirements in the umbrella policy should a loss occur. As the client may purchase the required coverage during the term of the umbrella policy, and therefore be in compliance, I have no duty to inform the umbrella carrier.

[FFA]

Why would the owner rely on the tenant to keep the policy on the building in force? Thats overhead that should be built into the rent. What if the business fails? Policy is going to go out of force and the owner not being the policy holder will have further issues getting Loss Runs, Insuring an uninsured property, will in all likelyhood be vacant, ect... Just sounds stupid on part of the building owner. He is not covering his ass ets.

[LadyBroker]

Just for fun, here is a quote from one of my markets Excess Liability Coverage Form:

Under Conditions for Covered Loss: "Maintenance of/Changes to Controlling Underlying insurance:
Any controlling underlying insurance must be maintained in full effect without reductions of such coverage or limits except for the reduction of aggregate limits in accordance with teh provisions of such Controlling Underlying insurance that results from injury or damage to which this insurance applies.

Such exhaustion or rediction is not a failure to maintain controlling underlying insurenace. Failure to maintain controlling underlying insurance will not invalidate insurance provided under this coverage, but insurance provided under this coverage part will apply as if the controlling underlying insurance were in full effect."

In other words, the policy doesn't drop down and become first dollar simply because the client elected to not renew his underlying GL or Auto or EL policies. Every carrier, of course, will have different conditions, but the main idea of this condition is a condition in every excess or umbrella policy.

Keep in mind, too, that most policies that we so loosely call Umbrella policies are really Follow Form excess policies....and it stands to reason that in order for that to be the case, there must be a Primary policy to follow.

[mccluney]

So, to place Lady Brokers last Post into lay terms. The umbrella/Excess policy she refers to would provide coverage, but the insured would have a deductible of $1,000,000 ( assuming that the underlying requirement for the particular policy was $1.000.000.)

[azcompanyman]

...It would be a $1m self insured retention.

[LadyBroker]

No, it would not be a Self Insured Retention. It would be lack of Underlying or Controlling Primary Insurance, which is not the same thing.

[azcompanyman]

ladybroker, you are correct. Technically it is not a SIR in the context of the policy and I should have clarified further. My point was that it would not be handled as a deductible in which the company pays the amount and seeks reimbursement from the insured. The insured would be directly responsible up to the policy limit before the excess coverage kicked in, which in priniciple is how a SIR works versus a deductible.

[LadyBroker]

Precisely, AZCompanyman!

It is actually scary how many folks really believe if they buy an umbrella policy, everything is covered.... yikes!