When the average person hears the word “excess,” it may call to mind a host of admonitions that permeate our culture: don’t eat to excess; don’t drink to excess; or classically, “all things in moderation,” right? So as a producer, if you are suddenly faced with a raised eyebrow when you try to broach the topic of excess insurance, it helps to be prepared with a ready answer for why an excess policy might be both necessary and prudent. It further helps to know how to explain what type and how much excess coverage is warranted.
First, is an excess policy really needed? For those who are already familiar with liability insurance, this question may seem silly. Such a view is based on the knowledge that jury awards in liability claims continue to soar to stratospheric levels, with no ceiling in sight. But for those who are most experienced with property insurance, the question is entirely valid and may require clarification; this is because there is a reasonably known limit to how much it can cost to repair or replace property that suffers a covered loss. Interestingly, as environmental insurance has matured as a hybrid between both property and liability coverage (since both types of policies typically exclude or severely sublimit pollution losses), this niche has become a key source of new excess policy placements. In some cases, growth has been driven by contractual requirements. In others, it has been propelled by highly publicized environmental disasters like the (self-insured) explosion of BP’s Deepwater Horizon drilling rig or the (under-insured) leak of Freedom Industries’ tanks that contaminated an entire city’s drinking water supply. Even though hindsight may be 20/20, it is not necessary to rely upon it to explain the potential implications of going without proper excess insurance.
After you have your insured’s attention, how do you explain the options available to provide these additional layers of protection? There are three basic approaches: a follow-form excess, a self-contained (a.k.a., stand-alone) excess, and an umbrella. Read the rest of the article on the PartnerOne Environmental website.
