Product Update

ISO Umbrella Supplementary Payments and Definitions Explained in Commercial Liability Insurance

This Commercial Liability Insurance release continues the expansion and revision of the annotation of the Insurance Services Office, Inc. (ISO), commercial umbrella liability coverage form (supplementary payments and definitions.

Supplementary payments under the ISO commercial umbrella coverage form reflect differences between a commercial general liability (CGL) insurer's and umbrella insurer's rights and duties with respect to providing a defense for covered claims, as well as some differences dictated by the presence of auto liability coverage in the umbrella. These differences are explained in an expanded and revised annotation of the ISO umbrella supplementary payments section.

It will be no surprise that ISO's version of a "standard" commercial umbrella form employs defined terms comparable to those of ISO's CGL coverage form. The format of the ISO umbrella copies that of the CGL, and ISO commented at the time of its introduction that the adoption of a Coverage A/Coverage B approach would make it easier for insureds to understand the way in which their umbrella coverage coordinated with their underlying insurance program. There are some important differences between ISO umbrella definitions and ISO CGL (or auto liability) definitions, but here too, the differences can help an insured better understand the scope and purpose of an umbrella policy.

There are, first of all, the umbrella definitions for which there is no counterpart in the CGL—terms that explain concepts unique to excess liability coverage, such as retained limit and ultimate net loss. Even the umbrella definitions of terms that it shares in common with the standard CGL coverage form sometimes diverge from the CGL definition that an insured may be familiar with. The ISO umbrella definition of "insured contract" includes elements of the definition of that term found in both the ISO CGL and the ISO business auto policy, since an umbrella is written to be excess of both of those basic liability coverages. Similarly, the ISO umbrella adds to the ISO CGL definition of "property damage" the concept of "pollution cost or expense," since losses that fall into that category are also covered as "property damage" in connection with the operation of covered autos.

All 28 ISO umbrella defined terms are explained in an expanded and revised annotation of the policy Definitions section.