Walsh Construction Company was working on a very large project that ran from 1996 to 2000. During the course of the project, it was the target of several lawsuits. Walsh promptly notified Reliance Insurance Company, its primary liability and umbrella liability insurance carrier, of each loss. Reliance responded on a timely basis each time and agreed to provide a defense in each case. Walsh was happy and secure in the knowledge that it had great coverage … that is until Reliance was placed in liquidation by court order in 2001.
With Reliance in liquidation, Walsh moved quickly. Within two weeks, it contacted Zurich Insurance Company, its excess carrier, informed it of all of the pending cases and requested defense coverage. Responding just as promptly, Zurich denied coverage because the claims were reported late. The court disagreed, stating that the underlying policies adequately covered the losses and involving Zurich would have been unnecessary except for the loss of the underlying coverage due to the liquidation.
When should the umbrella or excess carrier be notified?
The answer is not simple. The only way the insured will know is by reading the “Duties In The Event Of Occurrence, Offense, Claim Or Suit” condition in a particular policy. Since this lawsuit, Insurance Services Office (ISO) developed its own umbrella policy. The court in this case might have rendered a quite different decision if the current ISO umbrella had provided the coverage.
What happens if one of your carriers is forced into liquidation? If it is an admitted carrier in the state, guaranty funds may respond to your customer’s loss.
Are your business clients protected by an umbrella liability policy?
Many businesses don't believe they are large enough to need an umbrella. That belief is a mistake that could cost them their business, their homes and their peace of mind. Now is a great time to remind them of the importance of maintaining adequate excess limits.
Some new words were added to the 2008 edition of Insurance Words And Their Meanings.
Double trigger contract
Non-cumulation clause
Accident reconstructionist
Second Injury Fund
CBNR
CCRA
Side cars
Tiering
Chartered Enterprise Risk Analyst
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