Excess Liability/Umbrella Coverage.
When the basic liability limits provided by a policy are insufficient for an insured’s needs, two coverage forms are widely used to provide the additional amounts needed – umbrellas and excess liability policies.
Excess Liability Policies:
There are two basic types of excess liability policies: follow-form and stand-alone. Both require underlying policies to be in effect, and neither will provide any coverage not provided by an underlying policy.
A follow-form policy does exactly what its name implies – it provides the exact same coverages, provisions, exclusions insureds, etc. as the underlying policies.
A stand-alone policy also provides only the same coverages as the underlying policy, but each form does so on its own terms. A stand-alone policy, for example, may have its own exclusions and conditions.
Umbrella Liability Policies:
An Umbrella Liability policy operates much like a stand-alone excess policy, except that it will often provide coverages not included in the underlying policy. These additional coverages may include coverages such as property in the care, custody and control of the insured, world-wide premises liability or pollution liability, to name a few. If a claim involves a coverage provided by the umbrella policy, but not by any underlying policy, the umbrella becomes a primary policy. Any claim for which the umbrella is primary is subject to a deductible called a self-insured deductible.