ISO COMMERCIAL LIABILITY UMBRELLA COVERAGE FORM UNDERWRITING CONSIDERATIONS

INTRODUCTION

Commercial liability umbrella or excess liability coverage is designed to dovetail with the named insured's General Liability, Automobile Liability, Employers Liability, and other primary liability coverage forms and policies. The degree of underwriting involved with a given umbrella risk depends on several issues and circumstances. Some of these are addressed below.

ELIGIBILITY

Except for a comparatively few insurance companies, the typical commercial liability umbrella book of business is fairly small and usually consists of account risks. This means that liability umbrella coverage tends to be written solely for clients that have some or all their primary insurance with the same carrier. In these cases, the primary coverages underwriting criteria extends and applies to the umbrella coverage as well. A byproduct of this approach is to avoid high hazard risks in addition to risks that fall outside the carrier's underwriting appetite or "comfort zone." Examples of high hazard risks include:

• Aviation risks
• Professional liability, especially on health care and architects and engineers
• Risks with asbestos exposures
• High-risk construction projects
• Hazardous products liability exposures
• Other risks the carrier usually does not write

UNDERWRITING THE RISK

Experienced specialists with the skill to evaluate a specific risk's loss potential usually underwrite this line of business. Liability umbrella business usually has a long tail, and the underwriter's approach must involve a longer and broader underwriting perspective. The underwriter must concentrate on potential loss severity.

Ten or more years of verified loss experience may be more appropriate (if not required) instead of the usual three to five years of experience. Umbrella underwriters must be aware of and be extremely sensitive to current and emerging trends that may affect future liability.