Other Coverages: Umbrella/Excess Liability, Specialty Lines and Surety Bonds
Other Coverages: Umbrella and Excess Liability
Excess vs umbrella
Excess liability sits above specified underlying policies and generally follows the terms of those policies, paying only after the underlying limit is exhausted and only for losses the underlying policies would cover. Umbrella liability sits above the underlying policies but also drops down to cover some losses not covered by the underlying - for example, certain personal injury, blanket contractual, or worldwide exposures - subject to a self-insured retention when no underlying policy applies.
Provisions to expect
- Underlying requirements: the schedule lists required limits (for example, auto $1,000,000, CGL $1,000,000/$2,000,000, employers liability $500,000). If the insured carries less, the umbrella responds as though the required limit were in place.
- Defense: the umbrella usually defends after the underlying limits are exhausted, or assumes the defense when it drops down.
- Aggregate and each occurrence limits; some umbrellas have a single aggregate.
- Following form language - but umbrellas typically exclude what the underlying excludes and may add broader wording only where stated.
Personal umbrella
Written over homeowners and personal auto, adding broad liability limits plus coverage for libel, slander, and some exposures not in the underlying policies; it usually excludes business pursuits, professional liability, and intentional acts.
Traps
Questions test: (1) failing to maintain the required underlying limit, (2) whether the umbrella drops down (umbrella yes, straight excess no), (3) who defends and when, and (4) whether uninsured motorist coverage exists in the umbrella.
Rule of thumb
Excess follows form and never broadens; umbrella follows form and drops down for a stated list of exposures, usually after a self-insured retention.
Specialty Lines and Surety Bonds
Surety bonds
Suretyship is a three-party arrangement: the obligee (protected party), the principal (who must perform), and the surety (guarantor). Unlike insurance, the surety expects no loss and is indemnified by the principal. Types include contract bonds (bid, performance, payment, maintenance), license and permit bonds, and court/judicial bonds (fiduciary, appeal, attachment/replevin). Performance bonds guarantee completion of a contract; payment bonds guarantee payment of subcontractors and suppliers, usually issued together on public work.
Crime and fidelity
Fidelity bonds cover employee dishonesty; fidelity is a first-party coverage that responds to the employer's loss. Commercial crime forms add forgery or alteration, computer fraud, funds transfer fraud, money and securities (inside/outside), robbery and safe burglary, and social engineering fraud. The key trap: employee dishonesty coverage requires proof of intent to cause loss, and a discovery trigger applies, plus a retroactive or prior-loss limitation.
Professional and management lines
Professional liability (errors and omissions) is claims-made with a retroactive date; medical malpractice, architects and engineers, and lawyers' professional are examples. Management liability includes D&O, employment practices liability, fiduciary liability, and cyber liability. Cyber policies address data breach response, network interruption, and privacy liability, and often overlap with crime coverage for social engineering.
Equipment breakdown / boiler and machinery
Covers sudden accidental breakdown of covered equipment - electrical arcing, motor burnout, pressure vessel rupture - exposures excluded by standard property forms.
Rule of thumb
Three parties with a returned premium concept = surety bond; two parties with expected losses = insurance.