Working as Contractor's Insurance Agent we often have to add additional insureds to GL policy of our customers. The ISO (04 13) and (12 19) edition dates have a "Limits Provision "that says(sic) we will pay the lesser of either the required insurance from the contract or the limit on the dec page. Here is my dilemma. If the contract requires $1,000,000 Each Occurrence Limit for GL and $ 5,000,000 Umbrella Limit but our customer has $2,000,000 Each Occurrence Limit on the GL dec page, the carrier will only pay the $1,000,000 Contract "lesser amount" not the $2,000,000 GL Limit to protect AI in the event of a monstrous large GL claim.
In that scenario, the Umbrella carrier will not trigger and drop down until the GL required underlying schedule amount of $2,000,000 has been satisfied. This is a $1,000,000 gap that the customer has to pay in order to trigger Umbrella. Otherwise, they are in Breach Of Contract. As a result we won't accept these edition dates [ ( instead asking for (07 04) or (10 01)] which are being used quite a bit and those carriers are saying "why wouldn't we use most recent ISO edition dates??" It's good for them but potentially hazardous to customers and agents. Help! What is the solution?
Wisconsin Subscriber
In this case, each contract will need to be looked at individually. Does the contract require a minimum of $1M/$5M, or those specific limits? Is there a provision that states it has to be $1M/$5M or its equivalent?
If the contract specifies the required limits are a minimum, then the policy covers over and above what is required and thus the underlying policy should cover the $2M occurrence limit before going into the excess.
Unless the edition of the form is withdrawn in the applicable state, there is no requirement that the most recent form be used. This is not unusual for older edition dates to be used, particularly if the newer edition of a form represents a reduction in coverage to the insured. However, some carriers may opt to no longer use older edition dates. That also is their prerogative; they may not be required to use older editions of forms.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.