A couple of weeks ago, someone asked me about an article where I recommended that a certificate of insurance not include any reference to “following form” umbrella or excess coverage. Though I’ve discussed this often in webinars and seminars, as best as I can tell, I’ve never written about it.
Years ago, comedian George Carlin got attention with his bit on the 7 words you can’t say on radio or TV. If you don’t mind graphic obscenity, you can probably google this if you’re not familiar with it. When this was newsworthy, I came up with the 7 ‘insurance’ words or phrases you shouldn’t use with customers to avoid E&O problems. Words and phrases like “blanket,” “all risk,” and “full coverage.” Another one is the subject of this blog post: “following form.”
Over the years, I’ve seen contracts with these kinds of requirements if limits are provided by umbrella or excess policies:
- “Excess or umbrella liability policy is follow-form with no additional exclusions.”
- “Umbrella (excess) liability insurance is ‘Following Form’ to the General Liability Policy (meaning no additional exclusions that aren’t already on the CGL policy). Y or N.”
These were statements the contract required to be shown on a certificate of insurance or in some sort of a checklist. So, what’s the problem with using language saying that an umbrella or excess policy “follows form” to the underlying policies? The reason is that this is pretty much never true. And, if you say something that’s not true, especially on a certificate of insurance, it can be alleged to be a misrepresentation or fraud, something most state certificate (and other) laws prohibit.
The “following form” requirement usually means that the umbrella or excess policy must cover everything covered by the underlying policies since the requester is allowing the excess limits to apply in lieu of such limits being provided exclusively by the underlying policies. The reality is that no (or at least virtually no) umbrella or excess policies cover everything covered by the underlying policies. Most umbrella and excess policies have exclusions or an absence of coverage for exposures covered by underlying policies.
For example, an exclusion for damage to rented premises is common, with no exception for “fire damage legal liability” (FDLL) coverage or the ISO CGL’s open perils coverage for 7 days or less. Here is an example of a primary policy exclusion and the FDLL exception:
“‘Property damage’ to property rented to, occupied by or in the care of an ‘insured’. This exclusion does not apply to ‘property damage’ caused by fire, smoke or explosion.”
Here is the language in the excess policy:
“Property Damage to property owned, rented or occupied by you….”
As you can see, the excess policy provides no exception for fire, smoke or explosion. Therefore, it’s technically not “following form.” The reason in this case is that the FDLL sublimit is all that is required or allowed.
Defined terms such as BI and PD are often different in umbrella/excess vs. underlying policies and may effect lesser coverage in the umbrella/excess policy than the underlying CGL or auto.
Umbrella/excess policies often exclude auto UM/UIM coverage or, more commonly, provide a limit less than the overall form limit.
IRMI’s CGL reference manual set includes an analysis of the common umbrella/excess policies in the marketplace and might also address “following form” issues. You have to subscribe to this reference material to review that. For a good free article from IRMI about following form issues, click here.
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Bill Wilson
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Right on target as usual! The notion of “follow form” excess is so deeply ingrained that I have had more than one person tell me (without reading the policy, of course) that their excess/umbrella follows all the terms and conditions of the underlying policy – including the primary and noncontributory endorsement!
Consider the decades in the industry that we used the phrase “all risks.” At least in that case, we actually understood that it doesn’t really mean ALL risks without exception. In the case of “following form,” I think a lot of people really do think it covers exactly what they underlying covers and more. I’m reminded of the words of Inigo Montoya: “You keep using that word. I do not think it means what you think it means.”
Amen!
We will never have another one like George Carlin again. True genius.
Sidenote: my son Alex is a fan of Steven Wright.
My son and I are also fans of Steven Wright. Carlin was brilliant, but got rather mean spirited in his old age.
Enjoy Wright’s comedy, too. Never forget his comment about his leg falling asleep…and now it will be up all night!