Topics covered:

Coverage A

Coverage A exclusions

Coverage B

Coverage B exclusions

Supplementary payments

Who is an insured

Limits of insurance

Conditions

Definitions

Coverage A

1.     Insuring Agreement

a.     We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking damages for such “bodily injury” or “property damage” when the “underlying insurance” does not provide coverage or the limits of “underlying insurance” have been exhausted. When we have no duty to defend, we will have the right to defend, or to participate in the defense of, the insured against any other “suit” seeking damages to which this insurance may apply. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. At our discretion, we may investigate any “occurrence” that may involve this insurance and settle any resultant claim or “suit”, for which we have the duty to defend. But:

(1)     The amount we will pay for the “ultimate net loss” is limited as described in Section III—Limits Of Insurance; and

(2)     Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B.

     No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments — Coverages A or B.

b.     This insurance applies to “bodily injury” and “property damage” only if:

(1)     The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;

(2)     The “bodily injury” or “property damage” occurs during the policy period; and

(3)     Prior to the policy period, no insured listed under Paragraph 1 of Section II—Who Is An Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.

Analysis

The language of this insuring agreement is essentially the same as that of the commercial general liability (CGL) coverage form, with a few exceptions in terms. (For an analysis of the CGL form's insuring agreement, see CGL Coverage Form – Coverage A; the article is on the Public Liability A.3 pages.)

As an example, under the terms of the umbrella policy, the insurer agrees to pay the ultimate net loss in excess of the retained limit because of bodily injury or property damage to which the insurance applies. “Ultimate net loss” is a defined term on the policy, as is “retained limit”, and both terms are unique to an umbrella policy.

Also, the umbrella policy stipulates that the insurer has the right and duty to defend when the underlying insurance is exhausted or not applicable. In other words, the duty to defend is primarily on the shoulders of the underlying, primary carrier. However, the umbrella insurer will step in to defend the insured when the underlying coverage limits of insurance have been used up in the payment of judgments or settlements, or when the underlying insurance simply does not apply to the claim or lawsuit.

And, the liability umbrella insuring agreement does declare that when the insurer has no duty to defend, it does have the right to defend or to participate in the defense of the insured. This is to make sure that the interests of the umbrella insurer are not ignored or compromised when the underlying insurance carrier assumes the defense of the insured and the settlement of the lawsuit.

But, the umbrella policy also states, like the CGL form, that it will not provide coverage for bodily injury or property damage that was known by an insured to have occurred prior to the policy period. This is a reaction to the Montrose Chemical Corporation decision from California .