The AAIS Commercial Umbrella

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2. 2 Before We Begin Interactive seminar View PowerPoint� presentation over Internet Hear commentary over telephone Raise questions verbally or by �chat� function To use chat: Click �Exit Full Screen� To go back: Click �View,� select �Full Screen� Speed at which slides appear depends on-- Your Internet connection Your computer�s speed Your server�s speed

3. 3 Before We Begin, cont. Please adhere to antitrust guidelines Observe guidelines at all times When communicating by phone When using �chat� function

4. 4 Commercial Umbrella Program AAIS Commercial Umbrella/Excess Liability Program (CUP) Introduced in 2000 Can be written over many liability forms AAIS Commercial Liability (GL-100 and GL-200) AAIS Artisans (AP-100) AAIS Businessowners (BP-100, BP-200) ISO CGL Auto, Professional Liability, Liquor, Employers Liability, etc.

5. 5 Why is the product needed? Asset protection in a litigious age Contractual conditions Construction  Statutory requirements Motor Carrier Act  Need for a standardized product  Reinsurance considerations

6. 6 Program components -- Coverage part -- Sample declarations page -- Sample supplemental schedule -- Coverage options and exclusions -- Sample manual

7. 7 The program�s approach Combination of umbrella and excess Umbrella A single policy providing coverage over one or more underlying policies Limited �drop-down� for premises/operations and products/completed work exposures Excess Coverage triggered by exhaustion of underlying limits No �drop down� exposure Suitable for writing self-standing �layers�

8. 8 Definitions Included in base form to clarify intent Insured For excess coverage: Named insured and insureds on underlying policies (inc. additional insureds) For umbrella coverage: Standard commercial liability definition (you, spouse, partners, shareholders, etc.) Bodily injury Bodily harm, sickness, disease, or death Includes required care and loss of services Excludes mental or emotional injury except that which results from bodily harm.

9. 9 Definitions, cont. Other insurance Does not include scheduled underlying policies Does not include insurance intended to be excess of the umbrella Underlying insurance Policies shown on schedule of underlying insurance Includes policies issued to replace those policies Must provide same limits Must insure against same hazards Exhaustion of underlying limits is not failure to maintain underlying insurance

10. 10 Definitions, cont. Pollutant Follows standard commercial liability exclusion Any solid, liquid, thermal, or radioactive irritant or contaminant Includes acids, alkalis, chemicals, fumes, etc. Electrical, magnetic, or sound emissions Suit Any civil proceedings in a court of law in which damages are sought Includes arbitration Includes alternative dispute resolution proceedings

11. 11 Coverage E and Coverage U Coverage E, Excess Applies excess of scheduled underlying policies Coverage follows terms and conditions of underlying policies

12. 12 Coverage E and Coverage U, cont. Coverage U, Umbrella Drop down coverage for premises/operations and products/completed work exposures not addressed in underlying GL Other liability exposures excluded (such as auto, watercraft, professional liability, etc.) No drop down for exposures addressed by GL policy if the policy lapses or GL insurer goes bankrupt

13. 13 Coverage E and Coverage U, cont. Coverage U drop-down coverage Operations coverage over a premises-only GL policy (typically not intended) Broad form contractual liability over limited coverage in a GL policy (limitation available) Products/completed work coverage over a premises/operations GL policy (exclusion available) Coverage for property of others in insured�s care, custody, and control (exclusion available) Worldwide liability coverage (limitation available)

14. 14 Structuring liability coverage

15. 15 Structuring liability coverage, cont.

16. 16 Coverage E vs. Coverage U, cont.

17. 17 Coverage E Exclusions Few exclusions for Coverage E Exclusions in underlying insurance govern Coverage E exclusions ERISA Jones Act UM/UIM (coverage provided if required by state law) Medical payments Pollution, with exceptions for Hostile fire Ownership, maintenance, use of motor vehicles or mobile equipment

18. 18 Coverage U Exclusions Numerous exclusions for Coverage U No underlying exclusions Standard commercial liability exclusions added(intentional acts, war, etc.) Additional exclusions ERISA, Jones Act, and UM/UIM, as for Coverage E Aircraft, auto, liquor liability, professional liability, EPL, employee benefits, employers liability, watercraft Also mobile equipment and recreational vehicle Known injury (�Montrose�) Total asbestos and pollution exclusions

19. 19 Application of limits Unified limits for Coverage E and Coverage U Per occurrence, annual aggregate, products/completed work Claim paid as one or the other, but not both Limits depleted equally regardless of coverage triggered Coverage E payments Strictly in excess of scheduled underlying limits, even if underlying insurer goes bankrupt Coverage U payments Strictly in excess of retained limit or other insurance No drop-down for other exposures if insured fails to maintain underlying insurance underlying insurer goes bankrupt

20. 20 Defense Coverage General provisions Defense payments are in addition to coverage. No duty to defend after limits paid resulting from a written settlement or judgment Coverage E Right and duty to defend when underlying insurance is exhausted Right to associate with the insured and underlying insurer if it appears underlying policies will be exhausted Coverage U Right and duty to defend when no underlying insurance applies No duty to defend known injury

21. 21 Endorsements 26 exclusions Auto Contractual liability Designated products, premises, projects Personal or advertising Injury Care, custody, or control Professional, D&O, liquor Products/completed work hazard Eight coverage options Designated project or premises Aggregate limits per location, per project Products/completed work -- expanded definition

22. 22 Endorsements, cont. Coverage limitations Professional (excluding one or more, covering others) Territorial (worldwide to standard coverage territory) Contractual (broad to limited) State amendatory Amend cancellation and non-renewal condition Amend other policy conditions State specific issues Uninsured/underinsured motorists coverage Pollution

23. 23 Other policy components Sample declarations page Named insured information Schedule of underlying insurance Forms and endorsements that apply Supplemental schedule of underlying insurance Additional space to list underlying coverage

24. 24 Other policy components, cont. Sample manual Eligibility guidelines Rules and rating procedures Policy provisions Aggregate limits Required minimum underlying limits of insurance Minimum premiums Forms filed countrywide on advisory basis Approved in 51 jurisdictions Simply refer to AAIS filing and establish effective date

25. 25 Affiliation Annual cost One state: $1,000 2-10 states: $2,000 11-20 states: $3,000 21+ states: $4,000 Charges not cumulative; $4,000 is the most you pay in assessment Custom manual and filing service To affiliate Joyce Tignino, vice president of marketing joycet@AAISonline.com 800/564-AAIS