In an era where public housing agencies are increasingly venturing into the private market, a time marked by escalating settlement values and growing jury awards due to social inflation, the imperative for affordable housing providers to fortify their liability coverage has never been more pressing.
Excess liability and umbrella liability policies come into play to address this need, offering a protective buffer by covering losses that surpass the limits set by underlying liability policies, such as general liability.
Angel Fear, a regional manager with HAI Group’s Account Services team, emphasizes the role of these policies in constructing a coverage pyramid. For instance, if an affordable housing provider with a $1 million per-occurrence general liability limit faces a $1.5 million claim, excess and umbrella liability policies are designed to cover the $500,000 beyond the general liability limit. However, notable differences exist between these policies.
How do excess liability and umbrella policies differ?
Distinguishing between umbrella liability and excess liability is crucial. When an underlying liability policy's per-occurrence or aggregate limits are depleted through a claim payment, both umbrella liability and excess liability policies step in to bridge the financial gap. However, notable differences exist between these policies.
An excess liability policy generally follows form. In other words, it pays claims in the same way as the underlying policy, following all the same coverage terms, conditions, and exclusions. An excess liability policy generally applies to a single underlying liability policy. So, if there’s an excess liability policy written on top of general liability coverage, that excess coverage can only be tapped for general liability claims.
Umbrella liability policies typically don’t follow form and can protect against certain claims excluded by underlying liability policies. An umbrella liability policy can also be written on top of multiple underlying liability policies (e.g., general liability, employment practices, errors and omissions) but may have different coverage terms, conditions, and exclusions.
Why consider excess policies?
Several factors underscore affordable housing providers' need to invest in excess coverage.
Aggressive plaintiff tactics and the surge in nuclear verdicts necessitate measures to limit financial exposure in the event of substantial losses.
“Without excess coverage, a single claim could wipe out an affordable housing provider's reserve funds,” Fear said.
Moreover, lender requirements are pivotal, particularly as public housing agencies collaborate with private entities for property redevelopment. Investors often mandate adequate excess or umbrella liability coverage to mitigate financial risks.
"Banks are hedging for catastrophic losses," Fear said of excess coverage requirements. "Even if excess coverage isn't a requirement to borrow money, you still have an obligation to make sure your agency is sustainable."
HAI Group’s excess liability solution
Recognizing the heightened importance of excess coverage, HAI Group offers a tailored solution for affiliated affordable housing providers.
“Despite the contraction of the commercial insurance market in recent years, HAI Group remains steadfast in its commitment to providing excess liability coverage,” Fear said.
HAI Group's in-house development of an excess liability coverage option reflects its dedication to addressing the evolving needs of affordable housing providers. The company's credentials, including ownership and control by public housing agencies, an A(Excellent) rating from A.M. Best, and a robust track record of insuring over $80 billion in property values, attest to its reliability.
“With a focus on the affordable housing sector, HAI Group positions itself as a trusted partner, committed to serving the best interests of its clients,” Fear said.
Are you interested in working with HAI Group to secure excess liability coverage? Our Account Services team is ready to assist you.
This article is for general information only. HAI Group makes no representation or warranty about the accuracy or applicability of this information for any particular use or circumstance. Your use of this information is at your own discretion and risk. HAI Group and any author or contributor identified herein assume no responsibility for your use of this information. You should consult with your attorney or subject matter advisor before adopting any risk management strategy or policy.