When is an Umbrella Primary and Noncontributory?

Q: Lately, we have received several requests asking for proof that the umbrella includes “primary and noncontributory” provisions.

Some additional insureds are now saying that even if the umbrella is considered to follow form, it does not include those provisions because they are an endorsement to, not part of, the underlying coverage form.

That makes sense to me. Is it correct? Would an actual Primary and Noncontributory endorsement need to be added to the umbrella policy to comply with this requirement?

Response 1: Normally, liability insurance flows horizontally before it goes vertically. By that, I mean the primary general liability insurance pays before excess—see also “other insurance” language.

So, if you’re the additional insured on ABC’s GL policy and there is a claim, ABC’s GL policy pays. But before it goes to ABC’s umbrella to protect you, your own primary GL responds. Once that’s exhausted, ABC’s umbrella will respond. 

Key word here: “normally.” A few carriers now have umbrella endorsements that grant additional insured primary coverage, so the additional insured would not have to use their own GL.

Response 2: There is no such endorsement. Umbrella policies are never primary—they’re excess over either underlying or a retained limit.

Response 3: The policy has an “other insurance” condition, which you’d have to read to determine how it responds. If you want it to respond differently, yes, the policy would have to be endorsed.

Response 4: ISO has a noncontributory endorsement for this, though I don’t think it really does what it was designed to do. This issue comes up most frequently when someone uses a commercial general liability policy and an umbrella to meet minimum liability limit requirements.

Say the insured has a $1-million CGL and a job that requires $2 million. They could up their CGL limit, or they could buy a $1-million excess policy that sits over both the CGL and the business auto policy. Or maybe both CGL and auto requirements are higher, warranting an umbrella than an increase in underlying limits.

The issue is horizontal versus vertical exhaustion of limits. What’s the order of payment: insured’s CGL, then additional insured’s CGL, then insured’s excess, then additional insured’s excess? Or does it go insured’s CGL, then insured’s excess, then additional insured’s CGL, then additional insured’s excess? Needless to say, the additional insured wants the latter.

Response 5: A few umbrella and excess liability insurers have built “primary and noncontributory” language into their forms, but the majority have not. In the case of the latter, yes—you need a Primary and Noncontributory endorsement.

Response 6: Yes, you need to have an endorsement added to the umbrella policy which includes the “primary and noncontributory” language.

Response 8: By definition, I don’t believe an umbrella policy can be primary. It can be noncontributory if the proper endorsement is attached.

Response 9: The umbrella will not be primary and noncontributory. The question is, will the additional insured status provided by the umbrella be primary and noncontributory?

Response 10: It depends on the umbrella policy language. Typically, the umbrella requires a special endorsement to be primary and noncontributory, with the coverage carried by the additional insured named on the CGL with primary and noncontributory coverage.

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