The Business of Layers

The Trials and Tribulations ofAccessing Excess Coverage

Carrie ScottKCIC

Ilya KostenSelman

Breitman

David CoxMorgan Lewis & Bockius

The Business of Layers

• How to access the next layer– Information that can be used–Policy language–Other influences on policy

exhaustion

Primary vs. Umbrella/Excess Coverage

• Function of primary coverage

• Function of umbrella/excess coverage

• Relationship between layers (primary and excess) and where the policyholder fits in

Loss Runs• Format–Hard copy, PDF, Electronic (e.g. Excel)

• Quality– Legibility, Structure of the file

• Level of Detail– Payments and dates, Volume

• Reporting– Legacy systems of insurers

What can a policyholder do to make sure the loss run

can be used to prove underlying exhaustion?

Loss Run

What are some things an excess insurer needs from a loss run of the underlying

policy that it typically finds lacking?

Loss Run

What strategies have you utilized when loss runs are available to use as proof of

exhaustion, but are less than perfect?

Loss Run

Policy Language

• Defense Costs–Defense not covered–Within limits– Excess of limits

• Multi-year Policy/Policy Periods < 1 Year

• Qualcomm language

How can differing defense treatments (e.g. within or in

addition to limits) of underlying policies affect

when/how excess coverage is triggered?

Policy Language

Are there ways to recover any

defense costs that the underlying policy did not

cover?

Policy Language

What issues have you encountered when a policy has a stated annual limit,

but the policy period is less than 1 year or greater than

1 year?

Policy Language

If a policyholder has a multi-year primary policy with differing aggregate

and occurrence limits, what kinds of issues might arise when trying to reach the

excess coverage?

Policy Language

Must carriers pay their full limits to trigger the next layer of coverage? What have been the effects of Qualcomm language in a

policy?

Policy Language

Supporting Impairment

• Claims Data–Source(s) of information–Data elements captured–Data consistency between

sources

• Other Consumption

What are some objections an excess insurer may have regarding the underlying

insurer’s allocation/accounting of

exhaustion?(specifically if that underlying insurer has multiple policies)

Supporting Impairment

How can a policyholder still prove exhaustion when it does not have complete claim documentation?

Supporting Impairment

Is it enough to show an allocation/billing to an insurer to qualify as

exhaustion or do you need to show insurer payments

as well?

Supporting Impairment

Settlement Agreements

• Coverage-In-Place• Cost Sharing• Structured Payment• Buy-out

What kind of issues have you seen arise when a

structured payment agreement exists in the

underlying layer?

Settlement Agreements

When a buy-out agreement is for less than the policy limit:

Do excess insurers usually require showing exhaustion of the stated policy limit?

What strategies can be used to overcome this?

Settlement Agreements

When a CIP agreement specifies an allocation methodology for billing

underlying policies, what are some issues that the excess insurers (that did not sign the agreement)

may raise?

Settlement Agreements

What types of complications might exist when the same insurer is both primary and umbrella/excess in the same

coverage block?Are there any potential

advantages?

Settlement Agreements

How can policyholders and/or insurers use

electronic data when it comes to proving underlying policy

exhaustion during trial?What are some hurdles to the use of electronic data?

Electronic Data