Specialty Excess Insurance

Specialty excess insurance is a type of insurance coverage that provides additional protection beyond the limits of a primary policy. It is designed to fill gaps in coverage that may be left by a primary policy and provide additional layers of protection for specialized risks.

Specialty excess insurance is often used in industries that face unique or complex risks, such as construction, manufacturing, and healthcare. For example, a construction company may have a primary liability policy that provides coverage for accidents and injuries on a construction site. However, the limits of that policy may not be sufficient to cover the cost of a major accident or disaster. Specialty excess insurance can provide additional coverage in these situations, helping to ensure that the company is fully protected against financial losses.

Specialty excess insurance can also be used to provide coverage for specific types of risks, such as environmental hazards or cyber attacks. For example, a company that operates in an area prone to natural disasters may purchase specialty excess insurance to provide additional coverage for flood or earthquake damage. Similarly, a company that relies heavily on technology may purchase specialty excess insurance to protect against losses resulting from cyber attacks or data breaches.

Another benefit of specialty excess insurance is that it can be tailored to meet the specific needs of a business. For example, a company may choose to purchase coverage for specific types of losses, such as product liability or property damage, rather than comprehensive coverage. This allows the company to focus on the areas where they are most at risk and provides more cost-effective coverage.

In addition, specialty excess insurance can be purchased as a standalone policy or as an endorsement to an existing policy. This allows businesses to easily add coverage as their needs change over time.

Overall, specialty excess insurance is an important tool for businesses that face specialized risks. It can provide additional layers of protection beyond the limits of a primary policy, and can be tailored to meet the specific needs of a business. By purchasing specialty excess insurance, companies can ensure that they are fully protected against financial losses and can focus on growing their business.

Automobile excess liability insurance is available to drivers who cannot obtain more than the minimum liability insurance limits needed to satisfy the financial responsibility requirements in their state because of age, occupation, vehicle use, or driving record. It is also available to drivers in assigned risk plans.

This is excess bodily injury and property damage liability limits over the basic automobile liability insurance coverage limits provided by state-specific Automobile Insurance Plans (AIPs). Optional medical expense coverage and uninsured motorists coverage is also available. The premium charged is based on the primary policy premium.

Umbrella carriers establish mandatory underlying limits for primary coverages before they will attach. Buffer layer insurance is used when the primary carriers will not increase their underlying limits and the umbrella carrier will not reduce its mandatory underlying limits requirement. The buffer fills the gap.

This is a special form of umbrella liability designed for marine accounts that operate vessels or use docks. It covers protection and indemnity, general average, collision, salvage charges, sue and labor, and all other legal and contractual liability. It also covers employers liability; liability under admiralty laws and the Longshore and Harbor Workers Compensation Act; automobile liability; and general liability.

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to certain maximum limits per account. A limited number of carriers insure deposits for amounts that exceed this maximum in the event that a financial institution's bankruptcy causes the depositor financial loss that exceeds the FDIC guarantee.

This coverage is written as excess coverage over the National Flood Insurance Program (NFIP) on a following form basis. It triggers when the NFIP limits are exhausted. It is available countrywide for both residential and commercial properties that meet certain underwriting eligibility. This coverage is arranged through:

Excess liability insurance may be written over any form of primary liability insurance such as commercial general liability, commercial automobile liability, employers liability, and professional liability. The additional liability limits are requested as a way for a business to protect their assets. This insurance may be written as excess over primary liability coverages or as excess over a self-insured retention or deductible. Excess liability differs from commercial umbrella coverage by not providing any more coverage than is available in the underlying coverages.

Most self-insurers do not retain the entire amount of loss. In most cases, excess coverage is tied in with the self-insurance program. With liability insurance, both aggregate excess and specific excess coverage is available. Aggregate excess indemnifies the insured for the amount that the total loss for the period exceeds a set percentage of the normal premium for the period. Specific excess gives the insured protection above the self-insured retention for each accident or occurrence.

Excess coverage for doctors, other professionals, hospitals, and other health care-related businesses is available over primary coverage, self-insured plans, captive plans, and Joint Underwriting Associations (JUAs). A number of specialty carriers offer professional liability coverage on a straight excess basis over and above the primary limits that the underlying coverage provides. Coverage is written on a following-form over a primary policy. In addition, markets are available to write excess liability coverages for other professionals, such as accountants, architects, engineers, and attorneys.

Excess limits over primary marine liability limits are often needed. Marine employers' liability and commercial general liability limits on policies for marine businesses, such as boat builders and repairers, marine contractors, dredgers, and other vessel services, can be extended by using specialty markets that write excess marine liability limits. Excess liability coverages for marina operators, stevedores, charterers, wharfingers, and terminal operators can be written over self-insured retention (SIR) programs or over primary policies.

Employers liability for maritime risks usually falls under the jurisdiction of either the United States Longshore and Harbor Workers Compensation Act (USL&HWCA) or admiralty jurisdiction via the Jones Act. Coverage for workers involved in offshore oil drilling, marine diving or dredging, employed on fishing vessels, or serving as crew members on tugs, barges, ferries, scows, work boats, and pleasure yachts can be difficult to place because the work they perform is dangerous. Certain specialists well acquainted with maritime exposures provide excess maritime employers liability.

Stop loss insurance for self-funded employee benefit plans varies with the size of the insured group and the individual client's plan requirements. The package of benefits can include aggregate and specific stop loss insurance, medical conversion for terminating employees, group life, accidental death and dismemberment (AD&D), and a fully insured short-term disability plan.

Excess or layered property insurance may be written on any large commercial property account. This layering approach works well when the same entity owns multiple locations. Layering often starts with a primary coverage equal to the probable maximum loss (PML) followed by additional layers at a fraction of the primary layer's cost. The farther away the layer is from the working layer, the lower the rate. Limits and coverage availability can vary significantly based on geographic location.

Self-insured retention (SIR) programs allow insureds to retain more control of their assets. While certain programs may have low retention levels, most exceed $100,000. The SIR amount often increases as the program matures due to effective asset planning. The insured is responsible for all claims within the SIR. Most insureds choose a third-party administrator (TPA) to handle those claims. A number of large insurers and brokerage firms provide TPA services for their accounts on either a fee basis or as part of a total risk management services program. Advantages of SIRs include reductions in insurance costs, use of the cash flow until a loss actually occurs, at which time the insured sets up a reserve fund to pay losses instead of the insurer paying, and better control of loss prevention. SIR programs are customized for each insured. Coverages that SIR programs often include are workers compensation, auto liability, and commercial general liability.

The market for terrorism coverage changed dramatically on September 11, 2001. Coverage availability and pricing varies significantly, based on geographic location and type of industry.

These liability coverage forms provide excess general liability, automobile liability, and employer's liability limits. They also provide the insured with an element of protection against exclusions and gaps in the primary coverage forms or policies. Umbrella liability coverage is triggered when the limits of the primary insurance are exhausted or when a claim arises that primary insurance excludes but that the umbrella covers. Coverage is excess over only the scheduled underlying liability coverages.

An umbrella that covers a claims-made primary policy must be worded so that it is also excess over scheduled underlying coverage forms or policies that are occurrence based. The claims-made portion of the umbrella policy must track with the claims-made extended reporting period features of the underlying policy or policies, and the occurrence portion of the umbrella must track with the underlying occurrence basic coverage forms or policies.

This coverage is an important part of any self-insured workers compensation program. The insured first must qualify as a self-insurer and then post the required bond with the state industrial commission. Because loss experience can be unpredictable, the insured purchases excess insurance that triggers above a specified retention level. The excess insurance carrier pays losses above the insured's retention up to an agreed amount. The excess carrier may also offer additional services to the insured, such as claims handling, loss control, and various record keeping services.

Special bonds are required of organizations that choose to self-insure their workers compensation exposures. They must apply to the state's Workers Compensation Board, register to be a self-insurer, and post a bond that guarantees that claims will be paid.

Following are some examples of Excess Insurance claims and the corresponding insurance coverages that can help pay for them:

Specialty Excess Insurance, often known as excess liability insurance or umbrella insurance, is designed to provide coverage when the underlying primary policy's limit is exhausted. This type of insurance is especially useful in high-risk or high-value situations where lawsuits can easily exceed the limits of standard policies. Here are some examples of Specialty Excess Insurance claims.

Example 1: Professional Negligence
A consulting firm was sued for professional negligence after giving advice that resulted in substantial financial loss for a client. The client sought $3 million in damages, but the firm's professional liability insurance only covered up to $1 million. Here, the Specialty Excess Insurance kicked in to cover the remaining $2 million, ensuring that the firm did not suffer financial ruin because of the lawsuit.

Example 2: Product Liability
A manufacturing company produced a line of kitchen appliances that, due to a design flaw, caused multiple instances of property damage and personal injury. The company was sued for $5 million, but their product liability insurance only had a limit of $2 million. Their Specialty Excess Insurance was able to cover the remaining $3 million of the lawsuit, allowing the company to continue operations despite the unexpected financial burden.

Example 3: Auto Accident
A transportation company had an accident involving one of its trucks, resulting in multiple injuries and substantial property damage. The victims collectively sued the company for $10 million. The company's commercial auto liability insurance policy had a limit of $1 million per accident. Specialty Excess Insurance came into play to cover the remaining $9 million, saving the company from potentially debilitating financial consequences.

Example 4: Premises Liability
A hotel was sued after a guest slipped in the lobby and suffered serious injuries, requiring expensive medical treatment and rehabilitation. The guest sued the hotel for $4 million. The hotel's general liability policy had a limit of $1 million. Their Specialty Excess Insurance policy covered the remaining $3 million, allowing the hotel to handle the lawsuit without significantly impacting its financial health.

In all these scenarios, Specialty Excess Insurance played a crucial role in providing the additional coverage needed to handle lawsuits and claims that exceeded the limits of primary insurance policies. Without this extra layer of protection, these businesses could have faced serious financial hardship or even bankruptcy.