The Ugly Truth About Excess Insurance

Excess Insurance and Underlying Limits

In today’s video, managing partner Brian Friel walks us through an example of how ignoring excess insurance policy language can lead to disastrous results, but more importantly, how experience in the area of insurance recovery law allows us to effectively solve problems before they happen.  The issue addressed is how often ignored excess policy language dealing with exhaustion of underlying limits can get in the way of both meaningful settlements, and, if ignored, can lead to a forfeiture of excess coverage.  See Settling With Underlying Insurers for Less Than Policy Limits – The Good, the Decent and the Ugly.  This illustrates the kind value added services that we provide both for insurance policy review and claims assistance. 

Recognizing this and other insurance issues is only possible when legal counsel understand the nuances of insurance policy language and the impact of case law interpreting that language.  Watch the video to learn how businesses can better structure multi-layer insurance programs to elevate excess policy nightmares in the future.  

At Miller Friel, we have decades of experience in corporate insurance recovery law, and our singular focus on this area of law directly benefits our clients’ bottom lines. We are trusted advisors and litigators to many of the world’s most well-known companies.  If you have a coverage dispute or even questions about your current policy, please give our office a call to see how we can put our experience to work for you.  Our Washington, DC office number is 202-760-3160.

Below is a transcript of today’s video:

Our extensive experience with insurance claims allows us to fix problems and provide insurance solutions.

One example of what we do in the insurance advisory services area, just recently for a client of ours. Not very unusual, they have what we call a multi layer insurance program which is made up of a primary insurance policy and above that will be a series of excess policies. Sort of your tower of coverage. So for this particular client we’re talking about the total of $50 million of coverage, primary at 5 million and then another 45 of what we call additional or excess insurance.

Here’s the issue. Their existing insurance, it was a renewal program, they were coming up with their broker renewing the policies. The excess policies all had language that said we are only going to be triggered if the underlying or primary insurer pays their policy limits in full and the insurance company pays it. Here’s the problem, our client had a claim, another client had a claim, similar program. They want to settle with the underlying insurer, the primary. It was a $5 million policy. They had a dispute about coverage, our client was willing to pay $1 million towards the policy limit. The primary was going to pay 4, for a total of 5 to exhaust the program, to exhaust that policy. The excess policies all had this language that said, sorry we’re not triggered because the underlying insurer did not pay all $5 million itself. You, policyholder, made a contribution of $1 million.

This is a very, very bad situation that we see all too often. So recently we saw the same language in a series of renewal policies. We are working with their broker and with the client we were able to negotiate that language out of the excess policies so that now in a future dispute, if our client wants to make a contribution to the primary insurer or maybe another underlying excess insurer, the other carriers above them, the excess insurers are going to then be triggered and so their insurance proceeds are going to be available to our client. It’s a very, very important aspect of a multi-layer insurance program, but all too often it causes a problem later on with an actual live dispute.

And, really, it’s only through the experience of our claims work and seeing this play out in a real live dispute where we had a problem accessing excess limits. It’s that experience that enables us to be able to identify that problem and fix it during the negotiations with the underwriter. And sometimes the brokers who really take the lead on this don’t necessarily bring that experience to bear with respect to these insurance policies and negotiating these terms and conditions.

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