Property Not Covered

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AAIS Web-Based Seminar
The AAIS Commercial Umbrella/ Excess Liability
Program
Joseph S. Harrington, CPCU, director of
corporate communications Apr. 21, 2004 Audio
dial 877/326-2337 Conference ID 5518405
1745 S. Naperville Road, Wheaton, IL
60187-8132 Phone [phone] Toll free
800-564-AAIS Fax [phone] E-mail
info_at_AAISonline.com Web www.AAISonline.com
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Before We Begin

• Interactive seminar
• View PowerPoint presentation over Internet
• Hear commentary over telephone
• Raise questions verbally or by chat function
• To use chat Click Exit Full Screen
• To go back Click View, select Full Screen
• Speed at which slides appear depends on--
• Your Internet connection
• Your computers speed
• Your servers speed

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Before We Begin, cont.

• Please adhere to antitrust guidelines
• Observe guidelines at all times
• When communicating by phone
• When using chat function

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Commercial Umbrella Program

• AAIS Commercial Umbrella/Excess Liability Program
  (CUP)
• Introduced in 2000
• Can be written over many liability forms
• AAIS Commercial Liability (GL-100 and GL-200)
• AAIS Artisans (AP-100)
• AAIS Businessowners (BP-100, BP-200)
• ISO CGL
• Auto, Professional Liability, Liquor, Employers
  Liability, etc.

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Why is the product needed?

• Asset protection in a litigious age
• Contractual conditions
• Construction
• Statutory requirements
• Motor Carrier Act
• Need for a standardized product
• Reinsurance considerations

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Program components

• -- Coverage part
• -- Sample declarations page
• -- Sample supplemental schedule
• -- Coverage options and exclusions
• -- Sample manual

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The programs approach

• Combination of umbrella and excess
• Umbrella
• A single policy providing coverage over one or
  more underlying policies
• Limited drop-down for premises/operations and
  products/completed work exposures
• Excess
• Coverage triggered by exhaustion of underlying
  limits
• No drop down exposure
• Suitable for writing self-standing layers

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Definitions

• Included in base form to clarify intent
• Insured
• For excess coverage Named insured and insureds
  on underlying policies (inc. additional insureds)
• For umbrella coverage Standard commercial
  liability definition (you, spouse, partners,
  shareholders, etc.)
• Bodily injury
• Bodily harm, sickness, disease, or death
• Includes required care and loss of services
• Excludes mental or emotional injury except that
  which results from bodily harm.

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Definitions, cont.

• Other insurance
• Does not include scheduled underlying policies
• Does not include insurance intended to be excess
  of the umbrella
• Underlying insurance
• Policies shown on schedule of underlying
  insurance
• Includes policies issued to replace those
  policies
• Must provide same limits
• Must insure against same hazards
• Exhaustion of underlying limits is not failure to
  maintain underlying insurance

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Definitions, cont.

• Pollutant
• Follows standard commercial liability exclusion
• Any solid, liquid, thermal, or radioactive
  irritant or contaminant
• Includes acids, alkalis, chemicals, fumes, etc.
• Electrical, magnetic, or sound emissions
• Suit
• Any civil proceedings in a court of law in which
  damages are sought
• Includes arbitration
• Includes alternative dispute resolution
  proceedings

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Coverage E and Coverage U

• Coverage E, Excess
• Applies excess of scheduled underlying policies
• Coverage follows terms and conditions of
  underlying policies

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Coverage E and Coverage U, cont.

• Coverage U, Umbrella
• Drop down coverage for premises/operations and
  products/completed work exposures not addressed
  in underlying GL
• Other liability exposures excluded (such as auto,
  watercraft, professional liability, etc.)
• No drop down for exposures addressed by GL policy
  if the policy lapses or GL insurer goes bankrupt

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Coverage E and Coverage U, cont.

• Coverage U drop-down coverage
• Operations coverage over a premises-only GL
  policy (typically not intended)
• Broad form contractual liability over limited
  coverage in a GL policy (limitation available)
• Products/completed work coverage over a
  premises/operations GL policy (exclusion
  available)
• Coverage for property of others in insureds
  care, custody, and control (exclusion available)
• Worldwide liability coverage (limitation
  available)

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Structuring liability coverage
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Structuring liability coverage, cont.
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Coverage E vs. Coverage U, cont.
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Coverage E Exclusions

• Few exclusions for Coverage E
• Exclusions in underlying insurance govern
• Coverage E exclusions
• ERISA
• Jones Act
• UM/UIM (coverage provided if required by state
  law)
• Medical payments
• Pollution, with exceptions for
• Hostile fire
• Ownership, maintenance, use of motor vehicles or
  mobile equipment

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Coverage U Exclusions

• Numerous exclusions for Coverage U
• No underlying exclusions
• Standard commercial liability exclusions
  added(intentional acts, war, etc.)
• Additional exclusions
• ERISA, Jones Act, and UM/UIM, as for Coverage E
• Aircraft, auto, liquor liability, professional
  liability, EPL, employee benefits, employers
  liability, watercraft
• Also mobile equipment and recreational vehicle
• Known injury (Montrose)
• Total asbestos and pollution exclusions

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Application of limits

• Unified limits for Coverage E and Coverage U
• Per occurrence, annual aggregate,
  products/completed work
• Claim paid as one or the other, but not both
• Limits depleted equally regardless of coverage
  triggered
• Coverage E payments
• Strictly in excess of scheduled underlying
  limits, even if underlying insurer goes bankrupt
• Coverage U payments
• Strictly in excess of retained limit or other
  insurance
• No drop-down for other exposures if
• insured fails to maintain underlying insurance
• underlying insurer goes bankrupt

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Defense Coverage

• General provisions
• Defense payments are in addition to coverage.
• No duty to defend after limits paid resulting
  from a written settlement or judgment
• Coverage E
• Right and duty to defend when underlying
  insurance is exhausted
• Right to associate with the insured and
  underlying insurer if it appears underlying
  policies will be exhausted
• Coverage U
• Right and duty to defend when no underlying
  insurance applies
• No duty to defend known injury

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Endorsements

• 26 exclusions
• Auto
• Contractual liability
• Designated products, premises, projects
• Personal or advertising Injury
• Care, custody, or control
• Professional, DO, liquor
• Products/completed work hazard
• Eight coverage options
• Designated project or premises
• Aggregate limits per location, per project
• Products/completed work -- expanded definition

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Endorsements, cont.

• Coverage limitations
• Professional (excluding one or more, covering
  others)
• Territorial (worldwide to standard coverage
  territory)
• Contractual (broad to limited)
• State amendatory
• Amend cancellation and non-renewal condition
• Amend other policy conditions
• State specific issues
• Uninsured/underinsured motorists coverage
• Pollution

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Other policy components

• Sample declarations page
• Named insured information
• Schedule of underlying insurance
• Forms and endorsements that apply
• Supplemental schedule of underlying insurance
• Additional space to list underlying coverage

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Other policy components, cont.

• Sample manual
• Eligibility guidelines
• Rules and rating procedures
• Policy provisions
• Aggregate limits
• Required minimum underlying limits of insurance
• Minimum premiums
• Forms filed countrywide on advisory basis
• Approved in 51 jurisdictions
• Simply refer to AAIS filing and establish
  effective date

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Affiliation

• Annual cost
• One state 1,000
• 2-10 states 2,000
• 11-20 states 3,000
• 21 states 4,000
• Charges not cumulative 4,000 is the most you
  pay in assessment
• Custom manual and filing service
• To affiliate
• Joyce Tignino, vice president of marketing
• joycet_at_AAISonline.com
• 800/564-AAIS