By Jolie Small, Vice President, Alliant Insurance Services
Is your excess form truly “follow form,” and does that even really exist?
We spend a lot of time reviewing, editing and manuscripting primary policies but oftentimes excess policies are either just put into place or renewed without a second glance. Insurance Companies have enough reasons to deny claims, let’s not give them any extra. Be sure to check your excess forms just as closely as your primary. The goal is to make sure that the excess policies essentially grant the same coverage (if not broader) than your primary policy. If the policy language is significantly different than the excess policy may not respond to the same losses as the primary policy.
Two of the most important issues to look out for are (i) what triggers the policy coverage and (ii) if the most restrictive underlying language is present in the excess form. Excess policies used to state that coverage would not be triggered until there was an “actual payment of loss by the underlying insurers.” But what if the Insured cannot afford to wait for the actual payment on the underlying? Excess policies need to recognize erosion of underlying limits, regardless where the source of payment comes from. Meanwhile most restrictive underlying language is often still found in excess policy forms. Most restrictive underlying language is intended to make the excess policy follow any underlying policy provision as opposed to just the primary policy provisions.
The wording in your excess policy is just as significant as the wording in your primary policy. Some other key items to look out for is to make sure that there are limited exclusions in the policies, that the extended reporting periods are concurrent with the primary percentages and more stringent notice requirements are not present.
In an ideal world excess policies would be only one line which states, “we follow all definitions, terms and conditions of the primary policy,” but until then do not forget to double check all your forms, not just the primary.