Excess Policies and Additional Insureds

    A question that I often hear--If I add someone as an additional insured ‘underneath’ do I have to add that party as an A-I on the Umbrella/Excess policy? 99% of the time the answer is NO. Umbrella/Excess policies “follow the underlying forms” in this area--any party that is an A-I ‘underneath’ is an A-I on the Excess with the same coverage and same limitations. How does this effect contracts?

    Let’s say that your client is responsible to add someone as an A-I and provide limits of 5 million. They have a GL and an Excess Policy that totals 50 million. Since the A-I is covered under both does the coverage only extend to the terms of the contract or 5 million? No. The insurance contract goes by its terms not by a side contract. The A-I would have potential coverage all the way up-----UNLESS---

    Many Excess polices (ISO is one example) are addressing this issue and making it clear that the coverage to the A-I is the limits on the policy OR the limit required by a contract between the Named Insured and the A-I; whichever is less. This does make sense. The more that the ‘Named Insured’ gives to someone else the less the Named Insured has for him/her/its needs. Why give away more limits that you have to? Lots of people thing that A-Is only get the limits that are “leftover’ after the Named Insured(s) gets whatever they need that is available. This is incorrect. No insured has more rights to the limits than any other insured and limits do not “stack” even though we treat all insureds separately. The more A-Is on a policy the more the limits have been diluted for all insureds so why dilute them more than you have to?

    Next time we will discuss a VERY HOT Issue---while the A-I is covered under the Excess policy must their own CGL apply first?  99% of Excess Carriers say yes which is shocking to most parties in the rare cases that this happens.