Glossary

Underlyers are insurance policies occupying layers of coverage below the particular policy being referred to. For example, a general liability policy and an umbrella liability policy might be underlyers for an excess liability policy.

A drone, or unmanned aircraft, is an aircraft that is operated without the possibility of direct human intervention from within or on the aircraft. In addition to the most obvious uses for delivery and photography, drones have been adopted by risk managers and insurance companies to perform a variety of functions that improve productivity and safety in the field, such as claims adjusting in disaster areas, wildfire suppression, inspections, and documentation.

First dollar defense, umbrella, is an umbrella or professional liability policy provision under which the insurer agrees to indemnify the insured for costs of claims defense in the self-insured retention (SIR) area.

A follow form professional liability endorsement in an umbrella liability policy indicates that coverage applies under the same basis as in the underlying professional liability policy. In recent years, however, such endorsements are becoming increasingly difficult to obtain and are very unusual. This is because few umbrella insurers are also willing to assume the types of risks that professional liability policies cover.

A liberalization clause is a provision that extends to persons already insured under a particular policy the broadened coverage features that may be introduced in subsequent editions of that policy form. In umbrella liability insurance, a clause specifying that coverage will be as broad as that provided by the primary liability policies.

Pollution is the contamination of an environment by substances regarded as pollutants. Liability from pollution is normally excluded to some degree by the general, auto, and umbrella liability policies. In recent years, insurers have attempted to introduce strict exclusionary language into these policies, making it necessary for insureds to seek coverage under separate "environmental impairment liability" policies.

A series business unit (SBU) is a self-governing and protected company formed under the umbrella of a series limited liability company, currently permitted in Delaware. The SBU is an independent insurance company capable of issuing policies directly or policies fronted by a commercial insurer to the insured company and third parties. Each SBU has a unique business purpose and an independent tax identification number. The SBU's business purpose, taxpayer election, and coverage offerings are specified. Unlike the protected cells or segregated accounts of rent-a-captives, SBUs have greater flexibility offered by self-governance. An SBU is protected from the financial obligations of other SBUs by Delaware statute.

An insolvency clause is a clause holding a reinsurer liable for its share of loss assumed under a treaty, even though the primary company has become insolvent. This term also refers to a clause in an umbrella liability policy, stipulating that the umbrella will not drop down in the event the primary liability insurer is unable to pay because of insolvency.

Suability factor signifies the likelihood of a legally liable insured being sued for alleged injuries or damage to a third party. This factor is determined, in part, by the size of the insured's savings account and stock portfolio, the extent of the real estate holdings, the family income, their profile in the community, and future income. Individuals with a high suability factor nearly always need a personal umbrella policy with at least a $2 million limit.

The term lead umbrella refers to the first umbrella policy in a multilayer excess program that sits directly over the primary policies. Typically, higher-level excess policies sitting above the lead umbrella in this type of placement contain follow-form provisions making them follow the "lead" of the terms and conditions of the first underlying umbrella.