Other Liability Coverages: Umbrella, Excess, and Professional
Umbrella and excess policies sit above primary coverage. Excess policies typically follow form and pay after the underlying limits are exhausted. Umbrella policies may drop down to fill gaps in the underlying coverage and may provide broader coverage than the primary, including a self-insured retention for claims not covered by underlying insurance. Candidates should know the difference between a following-form excess policy and a broader umbrella, and how the underlying schedule and maintenance requirements work.
Professional liability covers errors and omissions in the rendering of professional services. It is usually claims-made and excludes bodily injury and property damage, which are handled by the CGL. Directors and officers liability covers wrongful acts of directors and officers. Employment practices liability covers wrongful termination, discrimination, and harassment. Each has its own definitions, exclusions, and claims-made structure.
Traps: assuming an umbrella always drops down; forgetting that excess coverage requires exhaustion of underlying limits; confusing professional liability with CGL; and missing that professional liability policies are usually claims-made with retroactive dates.
Rule of thumb: primary pays first, excess follows form above it, umbrella may fill gaps and broaden coverage. Worked example: a design firm has a CGL with a $1 million limit and a professional liability policy with a $2 million limit. A client sues for negligent design that caused purely economic loss. The CGL excludes the claim because there is no bodily injury or property damage. The professional liability policy responds because the claim is for professional services and the policy is claims-made. If the claim instead involved a physical injury at the job site, the CGL would respond first.