An excess liability policy adds limits on top of one or more underlying policies, such as general liability, auto and employers liability. A “follow-form” excess policy uses the underlying policy’s terms: if the underlying policy doesn’t cover a claim, the excess doesn’t either.
An umbrella policy also adds limits above the underlying policies, but it has its own insuring agreement. It can “drop down” to cover some claims the underlying policies exclude, after the insured pays a self-insured retention.
In practice the labels blur. Many policies called “umbrella” behave like follow-form excess, and the reverse. Read the insuring agreement and exclusions, not the title.
How it shows up in an agency
A contractor’s GC contract requires $5 million in liability limits. The client carries $1 million per occurrence on GL and auto. The producer places a $4 million commercial umbrella over the GL, auto and employers liability policies. The umbrella carrier requires minimum underlying limits, so the auto limit must stay at $1 million and the employers liability limit at the level the umbrella specifies. A gap would leave the client paying the difference themselves.
See carriers that write this line on our commercial umbrella page and personal umbrella page.
Common confusion
- Schedule of underlying insurance. Every underlying policy needs to be listed, with the limits the umbrella requires. Missing auto or employers liability is a common gap.
- Aggregates can run out. When paid claims use up an underlying aggregate, most umbrella and excess forms are written to sit in its place for later claims. Check the wording on exhaustion, and whether defense costs erode the limit.
- Contracts may require “per project” or primary and noncontributory wording to apply to the umbrella too.