Rancho Mesa's Alyssa Burley sits down with Sam Clayton, Vice President of the Construction Group to discuss the key differences between umbrella and excess liability coverage.
Show Notes: Register for the Fleet Safety Webinar; Subscribe to Rancho Mesa's Newsletter
Host: Alyssa Burley
Guest: Sam Clayton
Editor: Megan Lockhart
Music: "Home" by JHS Pedals, “News Room News” by Spence
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Transcript
Alyssa Burley: Welcome back, everyone. My guest is Sam Clayton, Vice President of the Construction Group with Rancho Mesa. Today, we’re going to discuss the key differences between umbrella and excess liability coverage.
Sam, welcome to show.
Sam Clayton: Good morning Alyssa. Glad to be back in StudioOne™.
AB: We appreciate you being here.
Now, municipalities and general contractors will include their insurance requirements in the contract. And it seems, umbrella and excess coverage are often used interchangeably. So, why is that and what’s the difference between them?
SC: Well, these two lines of coverages are often misunderstood because they have subtle differences. An excess liability policy has two primary functions.
It provides excess limits above the underlying insurance limits, like your general liability, auto and employer’s liability, and replaces underlying insurance limits as aggregate limits are exhausted.
The excess policy will be subject to the same coverage terms, conditions and exclusions as the underlying policies. This is what we call follow-form. Now, a commercial umbrella liability policy, however, has three primary functions. It provides excess limits above the underlying liability insurance limits. It replaces the underlying insurance limits as aggregate limits are exhausted. And also, offers broader coverage than primary policies for certain losses which would be subject to an SIR or self-insured retention.
AB: Okay. So, why are these coverages so important for a contractor?
SC: That’s a great question. This protects contractors from large unexpected losses that can have devastating financial impact on the company. With the dramatic rise in costs of insurance claims the last few years, either from social inflation or third-party litigation funding, multi-million dollar settlements are becoming more frequent.
For example, if one of your employees is involved in an auto accident that causes severe bodily injury to multiple people, the legal and medical costs incurred could easily exhaust your one million primary auto liability limit very quickly. Umbrella or excess policy limits would be available cover those losses.
So, I’d recommend when you get your contracts, review the limits of the insurance that they’re requiring for the umbrella or excess policy so that you can meet their contractual requirements before you bid it.
AB: Sam, if listeners have questions about their umbrella or excess coverage, what’s the best way to get in touch with you?
SC: You can reach me either at sclayton@ranchomesa.com or (619) 937-0167.
AB: All right, well Sam, thank you again for joining me in StudioOne™.
SC: Thanks Alyssa.
