AAIS COMMERCIAL UMBRELLA LIABILITY COVERAGE OVERVIEW

(October 2020)

INTRODUCTION

Umbrella and excess liability coverage forms and policies vary significantly from one insurance company to another. Underlying coverage forms and policies may not be uniform and must be examined carefully to determine if the named insured may have any gaps in coverage. In addition, each insurance company has its own underwriting standards and requirements and what is an acceptable risk to one company may not be to another. Some companies have proprietary endorsements that this analysis does not address. In many cases, these endorsements restrict or exclude coverage. Similarly, pricing approaches vary and any two or more companies almost never charge the same premium for the same exposure.

Simply stated, this line of business is far from uniform. While it is possible to address coverage forms and policies, underwriting standards, and rating approaches in general terms, one insurance company's approach to a given risk is usually different from another company’s approach. This is why it is important to carefully examine each insurance company’s coverage form or policy.

COVERAGE FORMS

The American Association of Insurance Services (AAIS) offers one umbrella policy and one excess/umbrella liability policy. Each is a monoline, standalone policy.

CU 0002–Commercial Umbrella Liability Coverage

This policy contains its own coverage, exclusions, and conditions. Limits are excess over underlying coverages. If the underlying coverage does not include a coverage that this policy provides, the umbrella limits are excess of the self-insured retention.

CU 0001–Commercial Excess/Umbrella Liability Coverage

This policy is a combination excess and liability coverage form. The excess portion is a follow form coverage over underlying coverage. The umbrella portion contains its own exclusions, conditions, and coverages.

Note: This was the only AAIS excess/umbrella coverage until it introduced CU 0002.

COMPARISONS

AAIS made some major changes that this update reflects. Because of that, there are comparisons of the old
UM 0200 to its revision, CU 0001. In addition, because CU 0002 replaced UM 0200 as the primary umbrella, comparisons of them are included. There is also a comparison of the Insurance Services Office (ISO) Umbrella Coverage Form to CU 0002, using CU 0002 as the starting point.

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

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

CU 0002–Commercial Umbrella Liability Coverage

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

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

AVAILABLE ENDORSEMENTS

There are numerous endorsements available to modify and tailor the AAIS Commercial Umbrella Liability Coverage. Some are mandatory and are required for specific classifications and types of business. Other endorsements are optional and let the named insured customize the basic coverage provided to match its coverage requirements. Still others allow the insurance company to modify the coverage provided to conform to its underwriting requirements.

UNDERWRITING

Underwriting commercial umbrella liability and/or commercial excess liability usually takes place only after an insurance company decides to write the primary coverage and determines the terms, conditions, and premiums that apply. While certain aspects of the primary underwriting are considered, umbrella coverage must consider other factors. One of the most important is determining if the underlying insurance company(ies) is/are acceptable.

RATING

Calculating the annual premium for this coverage form is done in a series of logical steps. AAIS provides sample rating guidelines and recommendations, but they are not a filed rating plan. As a result, pricing is both part art and part science.