We have all heard the varying terms for this coverage;
umbrella, marine umbrella, excess, bumbershoot, follow form excess. The real
question is what’s the difference?
Good news: It can be very simple. Bad news: These coverage
names are used interchangeably, yet do not provide the same coverage. To make
matters more confusing carriers sometimes title the form one thing yet the
wording is for another.
Names aside, there are two main coverage forms used in
today’s marketplace: Umbrella and Follow Form Excess. These forms, while both
providing higher liability limits, have key differences that will help you
determine which one it is despite how it is titled.
Umbrella policies generally utilize manuscript wordings
which vary by carrier, and typically show a Self-Insured Retention (SIR). What is covered in the underlying is typically
covered in the umbrella, and what is not covered in the underlying may be covered in the umbrella. The latter
situation is what we refer to as a drop-down scenario and where an SIR comes
into play. Simplistically, if a claim arises that is excluded in the primary
but covered in the umbrella the insured would pay first dollar up to the SIR
amount, then the umbrella carrier would respond after SIR is satisfied. These
policies are routinely 40-60 pages with many terms and conditions, it can be a
difficult to work out what is and what is not covered.
Follow Form Excess policies are very straight forward,
carriers typically use American Institute of Marine Underwriters 8A Follow Form
Excess Clauses. There is no SIR or
drop-down clause associated with these policies. Whatever is included in the
underlying is included in the excess, and whatever is excluded in the
underlying is excluded in the excess. Think of this form more of a tower that
goes directly over the primary policy(ies) and literally only extends the limits
upwards. Traditionally follow form excess’ were used over a single coverage
line, now the trend is to use for multiple coverage lines due to its
simplicity. These policies are only
10-14 pages with lots of clarity on coverage and few, if any, additional
exclusions.
It is vital that the primary policy(ies) is listed in the
Underlying Schedule, or else the excess policy will not go over it!
Moral of the story: Ignore the title, you really do not know
what you have unless you read the form. Read. Read. Read.
Author
Laura Jay CMIP
Custom Account Broker
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