I’ve spoken about this before in a number of seminars and webinars, but I don’t think I’ve ever written about it. Not long ago, an agent who had attended one of my webinars asked about an article on why you should never say on a certificate of insurance (or elsewhere) that a umbrella or excess liability policy provided “following form” coverage.
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.”
The “following form” requirement usually means that the umbrella or excess policy is expected cover everything covered by the underlying policies. The reality is that this is almost never the case. Many/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 that is provided for temporary rentals of 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 exclusionary 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.
Defined terms such as “bodily injury” and “property damage” are often different 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 UM/UIM limit less than the liability 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.
There is always a danger when you use verbiage on a certificate of insurance to describe coverage that is different from the actual policy language. Terms like “following form,” “blanket,” and “all risk” are terms we should resist using since they often serve as a noose in which the certificate holder hopes the agent will stick his or her head in.
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Bill Wilson
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Certiiiiificates are worthless so who cares?
Thanks so much Bill for writing this – the biggest area I find is misunderstood is in the “Other Insurance” provision of the umbrella/excess policy. More often than not, the contract requires the insured to provide the party with Additional Insured Status on a PRIMARY & NON-CONTRIBUTORY BASIS (including the umbrella/excess coverage) & demand this “follow form” wording as confirmation the coverage exists. In fact, 90%+ of unendorsed umbrella/excess policies specifically state the coverage applies excess over any other collectible insurance which means the additional insured status applicable to the umbrella/excess policy will not apply primary & non-contributory as required in the contract which opens up an E&O exposure for the agent. Appreciate you addressing this in your column!
I wrote about this in another blog post:
https://insurancecommentary.com/390-2/
Thanks Bill – Certificates are requested and required every day in this industry. Their worth aside, we agents must issue them and be subject to the E&O they could subject us to. Best to read the policy forms and know what you are putting on the certificate, as have so eloquently advised us many times.
Another example came to my attention this week in personal lines. The “racing” exclusion in ISO’s Personal Auto Policy (PAP) only applies while inside a facility designed for racing. Their Personal Umbrella Policy (PUP) has a “racing” exclusion but it does not require that the auto be used inside a facility designed for racing, just that the “race” be prearranged or organized. In other words, the coverage under the PUP for auto racing is less than the coverage under the PAP.