INTRODUCTION

Umbrella and excess liability coverage forms and policies vary significantly across different insurance providers. The underlying coverage may also differ and should be thoroughly reviewed to identify any coverage gaps for the named insured.

Additionally, each insurance provider has unique underwriting standards and requirements. What one company considers an acceptable risk might not meet another's criteria. Some companies also possess proprietary endorsements that are not covered in this analysis, which often limit or exclude coverage.

Furthermore, pricing strategies vary between companies, making it uncommon for two or more insurers to charge the exact same premium for identical risks.

In simple terms, this line of business is quite varied. Although coverage forms, policies, underwriting standards, and rating methods can be generally discussed, each insurance company tends to approach specific risks differently. As a result, it is crucial to review each company’s coverage form or policy thoroughly.

COVERAGE FORMS

The American Association of Insurance Services (AAIS) provides a single umbrella policy and a separate excess/umbrella liability policy. Both are monoline, standalone policies.

CU 0002–Commercial Umbrella Liability Coverage

This policy closely resembles a traditional, standalone commercial umbrella policy, with its own coverage, exclusions, and conditions. Its limits are excess over the underlying coverages. If the underlying policy does not include the coverage provided by this policy, the umbrella limits are excess of the self-insured retention.

CU 0001–Commercial Excess/Umbrella Liability Coverage

This policy combines excess liability with umbrella liability coverage. The excess portion adheres to the terms of the underlying policy, whereas the umbrella coverage has separate exclusions, conditions, and coverages.

NOTE: This was the only AAIS excess/umbrella coverage available until the introduction of CU 0002.

COMPARISONS

AAIS introduced significant changes reflected in this update. As a result, comparisons between the original UM 0200 and its revision, CU 0001, are included. Since CU 0002 replaced UM 0200 as the primary umbrella form, comparisons between CU 0002 and UM 0200 are also provided. Additionally, there is a comparison of the ISO Umbrella Coverage Form to CU 0002, with CU 0002 used as the baseline.

Related Articles:

Compare: AAIS CU 0002–Commercial Umbrella Liability Coverage 09 10 edition to ISO CU 00 01–Commercial Liability Umbrella Coverage Form 04 13 edition

Compare: AAIS CU 0002–Commercial Umbrella Liability Coverage 09 10 edition to AAIS CU 0001–Commercial Excess/Umbrella Liability Coverage 09 10 edition

Compare: AAIS CU 0001–Commercial Excess/Umbrella Liability Coverage 09 10 edition to UM 0200–Commercial Umbrella/Excess Liability Coverage 04 00 edition

ELIGIBILITY

A Commercial Excess/Umbrella Liability policy or a Commercial Umbrella Liability policy can be issued to a business when there is existing underlying commercial liability coverage provided through AAIS forms such as GL-100, GL-200, BP 0100, BP 0200, or other similar liability forms. These forms typically include coverage for premises, operations, products/completed work, professional liability, or other related risks.

It will be necessary to refer to the individual company guidelines for the underlying Auto eligibility requirements.

Most commercial enterprises are eligible.

POLICY MAKE-UP

The AAIS Commercial Umbrella Liability policy includes at least the following forms:

CU 0052–Commercial Umbrella Liability Declarations

-and-

CU 0001–Commercial Excess/Umbrella Liability Coverage

CU 0403–Exclusion Data Breach Liability - Coverages E And U

-or-

CU 0002–Commercial Umbrella Liability Coverage

CU 0404–Exclusion – Data Breach Liability – Coverages L and P

-and-

Policy Cover Page or Jacket. Individual insurance companies design and use this form for a variety of purposes.

AVAILABLE ENDORSEMENTS

There are many endorsements available to modify and tailor the AAIS Commercial Excess/Umbrella Liability policy or a Commercial Umbrella Liability policy. Some are mandatory and required for certain classifications and types of business, while others are optional, enabling the insured to tailor the coverage to their needs. Additionally, some endorsements permit the insurance company to adjust coverage to align with its underwriting requirements.

UNDERWRITING

Underwriting commercial umbrella liability and/or commercial excess liability generally occurs only after the insurance company agrees to provide primary coverage and sets the terms, conditions, and premiums. While some primary underwriting factors are taken into account, umbrella coverage also requires assessing additional elements. An important aspect is determining whether the underlying insurance company is acceptable.

RATING

Determining the annual premium for this coverage involves a series of logical steps. While AAIS offers sample rating guidelines and recommendations, these are not formally filed rating plan. As a result, pricing involves a combination of artistic judgment and scientific analysis.