CHAPTER § 5.05 Excess and Umbrella Coverage

• Jurisdiction: United States

§ 5.05 Excess and Umbrella Coverage

[1] Distinction Between Excess and Umbrella Coverage

"Primary insurance" is defined as "insurance that attaches immediately on the happening of a loss."¹⁴⁵ In contrast, excess insurance is a second line of insurance protection that is only triggered when liability exceeds the coverage limits of a primary insurance policy.¹⁴⁶ "Excess insurance is designed to provide high limits of coverage to guard against catastrophic loss."¹⁴⁷ Because excess coverage is only triggered when the primary insurance limit has been exhausted, a secondary insurer "greatly reduces his risk of loss," which "is reflected in the cost of the policy."¹⁴⁸ A "tower" of insurance refers to the layers of excess insurance above the primary policy for a particular policy period.

[2] Exhaustion of Limits

All forms of insurance will specify a "face amount" of the policy. This is the upper limit, or...