Insuring Agreement I

This insuring agreement commits the insurer to pay on behalf of the insured those sums in excess of the retained limit (a defined term) that the insured becomes legally obligated to pay as damages by reason of liability imposed by law. This pertains to bodily injury (BI), property damage (PD), or personal injury (PI) and advertising injury (AI) to which the umbrella insurance applies, or to bodily injury or property damage to which the insurance applies assumed by the insured under an insured contract (a defined term).

For this insurance to be applicable, the bodily injury or property damage has to be caused by an occurrence that takes place anywhere and occurs during the policy period. The same is true for personal injury and advertising injury coverage. So, the policy is an occurrence type policy. This insuring agreement also contains the known loss language which prohibits coverage if the BI, PD, PI, or AI occurs prior to the policy period and is known to have occurred by the insured.

If the insurer is prevented by law or statute from paying damages covered by this umbrella policy, the insurer agrees to indemnify the insured for those sums in excess of the retained limit.

Insuring Agreement II

Insuring agreement II pertains to a crisis management event (a defined term). The insurer agrees to advance crisis response costs directly to third parties on behalf of the named insured, regardless of fault, arising from a crisis management event first commencing during the policy period. A crisis management loss will be paid on behalf of the named insured up to the listed limit of insurance.

A crisis management event is deemed to first commence at the time during the policy period when a key executive of the named insured first becomes aware of an occurrence that gives rise to the event. It ends when the insurer determines that a crisis no longer exists, or when the limit of insurance has been exhausted, whichever occurs first.

Defense Provisions

The insurer gives itself the right and duty to defend any lawsuit against the insured that seeks damages for BI, PR, PI, or AI covered by the umbrella policy, even if the lawsuit is groundless, false, or fraudulent. But, there are conditions attached to this right and duty. Namely, the total applicable limits of the scheduled underlying insurance and any applicable other insurance have to be exhausted by payment of loss; or, if the damages sought are not covered by the scheduled underlying insurance. If the insurer is prevented by law or statute from assuming these defense obligations, it will pay any expenses incurred, incurred with the consent of the umbrella insurer. And, this duty to defend ends when the applicable limits of insurance have been exhausted by the payment of loss.

If the umbrella insurer assumes the defense of a lawsuit against the insured, the insurer also assumes other responsibilities. The insurer notes that it will investigate, negotiate, and settle the lawsuit as it deems expedient. Supplementary payments, such as premiums on bonds, court costs, interest payments, and the insured's costs, will be paid by the insurer, to the extent such payments are not covered by the scheduled underlying insurance or any applicable other insurance.

Finally, if the umbrella insurer does not assume the duty to defend the insured, it still reserves to itself the right to participate in the defense of any lawsuit and in the investigation of any claim to which the umbrella policy may apply. This right is exercised at the insurer's own expense.

Limits of Insurance

The limits of insurance shown in the declarations page of the umbrella policy are the most that the insurer will pay for all damages under the terms of this policy. This is so, regardless of the number of insureds, claims brought, lawsuits filed, persons or organizations making claims or filing lawsuits, or coverages provided under the umbrella policy.

The umbrella policy has a general aggregate limit which applies to all damages except for damages included within the products-completed operations hazard (a defined term), and damages resulting from the ownership, maintenance, or use of an auto. There is a separate aggregate limit for products-completed operations listed in the declarations.

A listed each occurrence limit is the most the insurer will pay for the sums of all damages arising out of any one occurrence.

This policy has a separate clause pertaining to insured contracts. The policy states that the most the insurer will pay for damages on behalf of any person or organization to whom the named insured is obligated by written insured contract to provide insurance is the lesser of the following: the limits of insurance shown in the declarations or the minimum limits agreed to in the insured contract.

The limits of insurance in this umbrella policy apply only in excess of the total applicable limits of scheduled underlying insurance and any applicable other insurance, whether or not such limits are collectible. If the total applicable limits of scheduled underlying insurance and any applicable other insurance are reduced or exhausted by the payment of loss to which the umbrella policy applies, the insurer agrees to the following: in the event of reduction, the umbrella insurer will pay excess of the remaining total applicable limits of the scheduled underlying insurance and any applicable other insurance; and in the event of exhaustion, the umbrella insurer will continue in force as underlying insurance.

Of course, the umbrella insurer will not make any payment unless and until the total applicable limits of scheduled underlying insurance and any applicable other insurance have been exhausted by the payment of loss, or the total applicable self-insured retention (SIR) has been satisfied by the payment of loss.

Expenses incurred to defend any lawsuit or to investigate any claim are in addition to the applicable limits of insurance.

The crisis response coverage that this umbrella policy provides has its own section in the limits of insurance clauses. The crisis response sublimit of insurance is the most the insurer will pay for all crisis response costs, regardless of the number of crisis management events commencing during the policy period. This amount is part of and not in addition to the applicable limit of insurance. The excess casualty crisis fund limit of insurance is the most the insurer will pay for all crisis management loss, regardless of the number of events commencing during the policy period. This amount is in addition to the applicable limit of insurance. And finally, the insurer declares that it has no obligation to advance crisis response costs when it determines that a crisis management event has ended, or whenever the crisis response sublimit of insurance has been exhausted, whichever occurs first.

Exclusions

The umbrella policy has twenty-three exclusions to consider.

The first exclusion pertains to BI or PD arising out of the ownership, maintenance, use or entrustment to others of any aircraft or watercraft owned or operated by or rented or loaned to any insured. The exclusion does not apply to watercraft that the named insured does not own and that is less than twenty-six feet long and is not being used to carry persons or property for a charge.

Next is the asbestos exclusion. The umbrella liability insurance does not apply to liability arising out of the manufacturing of, mining of, use of, sale of, installation of, removal of, distribution of, or exposure to asbestos, asbestos containing products or materials, asbestos fibers, or asbestos dust.

Contractual liability is addressed by the third exclusion. The umbrella insurance does not apply to any liability for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. There is the standard exception here for liability for damages that the insured would have in the absence of a contract or agreement, and for liability assumed in an insured contract (a defined term).

This insurance does not apply to damage to impaired property or property not physically injured arising out of a defect, deficiency, inadequacy, or dangerous condition in the product or work of the named insured.

This umbrella policy contains the damage to property exclusion that is found in the standard general liability (CGL) form. Also present in this policy are the standard damage to your product and damage to your work exclusions that the CGL form contains.

The next exclusion notes that the insurance does not apply to personal injury and advertising injury arising out of an electronic chatroom or bulletin board that the insured hosts, owns, or over which the insured exercises control.

This insurance does not apply to the liability of any employee or volunteer qualifying as an insured arising out of BI, PD, PI, or AI to the named insured, partners, employees, or volunteers. Employment practices liability is also excluded under the terms of the umbrella policy.

The umbrella liability coverage does not apply to BI, PD, PI, or AI expected or intended from the standpoint of the insured. The usual exception for self defense appears here.

This insurance does not apply to PI and AI arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in the named insured's advertisement, of copyright, trade dress, or slogan.

There is a liquor liability exclusion in this policy, but it has some exceptions. The exclusion does not apply if the insured is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages, and if coverage is provided for BI or PD by the scheduled underlying insurance. If the umbrella policy does provide coverage for liquor liability based on these exceptions, the coverage will follow the terms, definitions, conditions, and exclusions of the scheduled underlying insurance. The coverage provided by this umbrella policy will be no broader than the coverage provided by the scheduled underlying insurance.

The next exclusion pertains to media and internet type businesses. This insurance does not apply to PI or AI committed by an insured whose business is advertising, broadcasting, publishing, or telecasting, designing or determining content of web-sites for others, or an internet search, access, content, or service provider.

This umbrella insurance does not apply to any obligation of the insured under any no-fault, uninsured motorist, or underinsured motorist law, or any similar law.

The nuclear liability and the pollution liability exclusions are also included in this policy.

Exclusion eighteen is the sistership exclusion. There is no coverage for damages claimed for any loss, cost, or expense incurred by the named insured or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of the named insured's product, work, or impaired property. This is based on the withdrawal or recall being done because of a known or suspected defect, deficiency, inadequacy, or dangerous condition in these items.

Securities are addressed in the next exclusion. The umbrella insurance does not apply to any liability arising out of any violation of any securities law, or any regulation promulgated under that law. Depreciation or decline in the price or value of any security or financial instrument is also excluded from any liability claim coverage.

This insurance does not apply to PI and AI arising out of the unauthorized use of another's name or product in the named insured's e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.

Various personal injury and advertising injury actions are excluded from coverage. PI and AI caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict PI and AI are excluded. The publication of material known to be false by the insured is not a covered offense. Criminal acts by the insured are not covered. Liability assumed in a contract or agreement is not covered, although this exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement. Liability arising out of the breach of a contract is not covered. PI and AI arising out of the failure of goods or products or services to conform with any statement of quality or performance made in an advertisement, or arising out of the wrong description of the price of the goods, products, or services stated in an ad are not covered. Finally, liability arising out of oral, written, or electronic publication in any manner or material whose first publication took place before the beginning of the policy period is excluded under the terms of the umbrella policy.

The umbrella coverage does not apply to ERISA claims or any workers compensation, disability benefits, or unemployment compensation claims.

The last exclusion on this umbrella policy applies to war. Any liability arising directly or indirectly as a result of or in connection with war (as defined) is excluded.

Conditions

The conditions that appear in the AIG commercial umbrella liability policy are standard ones that are found in most, if not all, umbrella liability policies.

The appeals condition declares that the umbrella insurer may elect to appeal a judgment against the insured that is in excess of the total applicable limits of the scheduled underlying insurance if the underlying insurers fail to do so. All court costs and expenses for this appeal will be borne by the umbrella insurer.

The insurer claims for itself the right to audit and examine the books and records of the named insured as they relate to the umbrella policy. Also, the insurer claims the right (but not the duty) to inspect the premises and operations of the named insured at any time.

The bankruptcy, insolvency, or inability to pay of the named insured or the underlying insurer does not relieve the umbrella insurer of its duty to pay covered claims. However, under no circumstances does such bankruptcy, insolvency, or inability to pay require the umbrella insurer to drop down, replace, or assume any obligation under the scheduled underlying insurance.

Cancellation procedures are outlined in the conditions section of the policy.

If during the policy period, the first named insured consolidates with or merges into, or sells all or substantially all of its assets to any person or entity, this policy continues in full force and effect as to BI and PD and PI and AI that occurred prior to the effective date of such a transaction. There will be no coverage for these things caused by an occurrence that takes place on or after the effective date of such a transaction.

Notice to any agent or knowledge possessed by any agent or any other person will not effect a waiver or change in any part of this policy. This policy can be changed only by a written endorsement that the insurer makes to the policy.

The duties of the named insured and any other involved insured in the event of an occurrence, claim, or lawsuit are spelled out here. And, it is noted that no insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without the consent of the insurer.

It is noted that the descriptions in the headings of the policy are solely for convenience and do not form any part of the terms and conditions of coverage.

No person or organization has a right under this policy to join the insurer as a party to a lawsuit asking for damages from an insured, or to sue the insurer under this policy unless all of its terms have been fully complied with by the involved entities.

The conditions section of the umbrella policy has the requirement that the named insured keeps the scheduled underlying insurance in full force and effect. This duty applies to the terms, definitions, conditions, exclusions, and applicable limits of the underlying insurance and to any renewals or replacements of such underlying insurance. If the named insured fails to comply with this condition, the insurer notes that it will be liable only to the same extent that the insurer would have been, had the named insured fully complied.

If other valid and collectible insurance applies to damages that are also covered by this policy, this policy will apply excess of the other insurance. However, this condition will not apply if the other insurance is specifically written to be excess of this policy.

As for the payment of premium, the first named insured is designated here as the responsible party. Cancellation of the policy will result in a pro-rata assessment of the premium. A minimum premium as shown in the declarations will be retained by the insurer even if the policy is cancelled mid-term.

Except with respect to the limits of insurance and rights and duties specifically assigned to the first named insured, this insurance applies as if each named insured were the only named insured, and separately to each insured against whom a claim is made or a lawsuit is brought.

If any insured has rights to recover all or part of any payment that the umbrella insurer has made under this policy, those rights are transferred to the insurer and the insured must do nothing after a loss to impair these rights. In fact, the rights and duties of the named insured under the policy may not be transferred without the written consent of the insurer.

The final condition for this policy deals with the unintentional failure to disclose. The failure of the named insured to disclose all hazards existing as of the inception date of the umbrella policy will not prejudice the named insured with respect to the coverage afforded by the policy. This is so provided that any such failure or omission is not intentional.

Definitions

Many of the definitions that appear in this umbrella policy are standard and found in most liability policies. However, there are other definitions that are specific to this policy.

The definitions section starts off with the words advertisement, auto, and bodily injury. These are not out of the ordinary terms. Advertisement is a notice to the general public about the goods, products, or services of the named insured for the purpose of attracting customers. An auto is a land motor vehicle designed for travel on public roads. And bodily injury means bodily injury, sickness, or disease sustained by any person and including death or mental anguish resulting from any of these at any time.

The next seven definitions pertain to this policy and its crisis response coverage.

A crisis management event means an occurrence that, in the good faith opinion of a key executive of the named insured, and in the absence of crisis management services, has or may result in: damages covered by this policy that are in excess of the total applicable limits of the scheduled underlying insurance or the SIR; and significant adverse regional or national media coverage. A crisis management event includes man-made disasters and contamination of food, drink, or pharmaceuticals.

A crisis management firm is any firm that is shown in schedule A of the umbrella policy that is hired by the named insured to perform crisis management services in connection with a crisis management event.

A crisis management loss means the following amounts incurred during a crisis management event: amounts for the reasonable and necessary fees and expenses incurred by the crisis management firm in the performance of its services for the named insured; and, amounts for reasonable and necessary printing, advertising, mailing of materials, or travel by directors, officers, employees or agents of the named insured or a crisis management firm incurred at the direction of a crisis management firm.

Crisis management services are those services performed by a crisis management firm. This includes advising the named insured on minimizing potential harm to the named insured and maintaining and restoring public confidence in the named insured.

Crisis response costs include the following reasonable and necessary expenses incurred during a crisis management event: medical expenses; funeral expenses; psychological counseling; travel expenses; temporary living expenses; expenses to secure the scene of a crisis management event; and any other expenses pre-approved by the company. Defense costs are not included.

Crisis response sublimit of insurance means the sublimit shown in item 3D of the declarations of this policy.

Excess casualty crisis fund limit of insurance means the limit shown in item 3E of the policy's dec page.

This umbrella policy next defines hostile fire, impaired property, insured, and insured contract. None of these definitions are out of the ordinary and can be found on any standard liability coverage form.

A key executive is defined here as the chief executive officer, chief operating officer, chief financial officer, president, general counsel, or general partner of the named insured; a sole proprietor is also the key executive if the named insured is a sole proprietorship.

A loss is defined as those sums actually paid as judgments or settlements.

Mobile equipment, named insured, and occurrence are also in the definitions list for this umbrella policy. None are out of the ordinary in their meanings.

Other insurance is defined as a policy of insurance providing coverage for damages covered in whole or in part by this policy. Other insurance does not include scheduled underlying insurance, the SIR, or any policy of insurance specifically purchased to be excess of this umbrella policy and affording coverage that this policy also affords.

This policy also defines personal and advertising injury, policy period, pollutants, products-completed operations hazard, and property damage. These definitions follow the wording found on a standard CGL coverage form from the Insurance Services Office (ISO).

A retained limit means the total applicable limits of scheduled underlying insurance and any applicable other insurance providing coverage to the insured, or the SIR applicable to each occurrence.

Scheduled underlying insurance is the policy or the policies shown in the schedule forming part of this umbrella policy. This term does not include a policy of insurance specifically purchased to be excess of this policy and affording coverage that this policy also affords.

A self-insured retention (SIR) is simply the amount shown in item 5 of the declarations.

The last three definitions in this policy are suit, your product, and your work. These are all standard definitions found in liability policies.