Note: This article was revised on November 10, 2017 to clarify that the new ISO umbrella and excess endorsements extend coverage on a noncontributory, but not primary, basis. (Thanks to Larry Hunt of the Hunt Insurance Group for pointing out the misleading implication in the original article.)
Although I’m no longer a staff member of the Big “I”, I continue as a volunteer faculty member of the Virtual University. About three weeks ago, an agency member submitted a question about primary and noncontributory coverage on umbrella policies. It was his impression that you could not add AI status on a primary and noncontributory basis to umbrella and excess policies, but an underwriter told him that, if such status is provided on the underlying policies, it extends to umbrella/excess policies. His concern was that the underwriter had told him things in the past that later were determined to be incorrect.
On this question, how an umbrella or excess policy responds depends on the language in the form in question. Never assume or generalize. While umbrella and excess policies often extend AI status, whether such status is extended on a primary and/or noncontributory basis may depend on the policy language or statutory or case law dealing with issues such as horizontal vs. vertical exhaustion of limits.
That being said, in 2016 ISO introduced noncontributory endorsements for both their umbrella and excess policies (and a primary and noncontributory endorsement their BAP):
- CA 04 49 11 16 – Primary And Noncontributory – Other Insurance Condition
- CU 24 78 11 16 – Noncontributory – Other Insurance Condition
- CX 24 33 11 16 – Noncontributory – Other Insurance Condition
These changes were introduced at the request of the Big “I” Technical Affairs Committee and/or the Big “I” Mid-American Insurance Conference (www.matcinsurance.com) in an attempt to address the vertical vs. horizontal exhaustion requirement in an increasing number of construction contracts. ISO has already done this in 2013 for the CGL program with their new CG 20 01 endorsement. In the case of umbrella and excess policies, since by accepted definition they are excess over any other primary coverage, the new endorsements are noncontributory but not primary to the primary policies of an AI.
So, absent any overriding extra-contractual law to the contrary, these endorsements can now be used by ISO subscribing carriers to comply with contract requirements to provide noncontributory coverage on CUP/excess policies. For a more detailed explanation of the differences between “primary” status and “noncontributory” status, check out IRMI’s excellent article from liability expert Craig Stanovich:
“Commercial Umbrellas and the Demand for Primary and Noncontributory“
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Bill Wilson
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As a follow up, does the absence of these endorsements render the policy as not primary or not non-contributory?
I don’t think even these endorsement are a guarantee that the AI has primary and noncontributory coverage under the insured’s policy, especially the auto policy. When you have two or more policies, each with a primary/excess/pro-rata/equal shares “Other Insurance” clause, the only way to know for sure which policy is primary and noncontributory for which party is to compare ALL of the policies. There is case law on this. In one case, the downstream policy said it was primary; however, the AI’s policy was non-ISO and said that it was also primary. So the court found that both carriers would share the claim.
IF all of the forms are pure ISO language, then these endorsements serve some value in that they reflect the downstream carrier’s express intention to provide primary and noncontributory coverage to the AI and hopefully the carrier would honor that commitment and not challenge it in court.
I am in the midst of a contract review for a large project and will say that my 1st layer of excess was not true follow-form and then the second layer had a specific Other Insurance clause that was very clear that it was NOT primary and WOULD seek contribution from other insurance available. We were able to get a specific endorsement for this particular project, but you HAVE to read the forms.
I should blog about “following form” umbrella and excess policies. My experience has been that a true “following form” policy does not exist. Umbrellas usually provide broader coverage than the underlying policies. Excess forms usually provide similar coverage to the underlying policies. But all of the ones I’ve seen have something that is lesser coverage. For example, you’re usually not going to see broader peril coverage or higher limits for fire damage legal liability than that provided by the CGL policy. You’re also quite likely going to see no or lesser limits for UM coverage. That’s why it’s so important not to make blanket statements on certificates of insurance or related documents that “following form” coverage is provided. It’s an undefined term and you can be assured that the recipient’s interpretation is going to be as broad as possible.
I am in complete agreement and we have a standard in our agency that we do not make a follow-form statement. So many of the carriers are now issuing their policies on forms that say “Umbrella/Excess” which is very misleading.
Several years ago, I moved my personal lines account and the carrier I was considering had an umbrella policy, at least it said “Umbrella.” There was absolutely nothing in it broader than the underlying policies and much that was inferior. It was (at best) an excess policy.