The features of ISO's new personal umbrella and how
they coordinate with underlying coverage

By Bruce Hicks, CPCU, CLU


Let's begin this discussion with a multiple-choice question. Which one of the following policies is not offered by the Insurance Services Office?

a. Personal automobile

b. Homeowners

c. Dwelling fire

d. Personal umbrella

Well, the answer used to be "d." However, ISO has turned the above into a trick question with the introduction of a personal umbrella policy as part of its Personal Liability program. Its full name is the Personal Umbrella Liability Policy, DL 98 01 and it has a 6/98 edition date. This coverage form, along with a group of companion umbrella endorsements, has been approved for use in a number of states. ISO introduced the coverage to complement its other personal lines products, and they refer to it as the PUP (though the form's actual acronym is PULP).

While the PUP was filed nationwide (with a few exceptions), the filing was done only for ISO and not on behalf of its subscribing customers. ISO's filing decision recognized the fact that many of its customers either had their own umbrella form or did not have an interest in offering an umbrella. This filing strategy permits ISO's customers to actively decide whether they wish to adopt the program. It also avoids inconveniencing subscribers who decide to continue with their own forms as well as the companies that continue not to offer excess liability coverage.

The availability of ISO's PUP could be of benefit to companies that:

* use ISO forms, but have their own umbrella policy

* use ISO forms, don't have an umbrella and desire to offer the coverage

* do not use ISO, but may be interested in a complete ISO program

Insurers that are active in personal lines have their own forms philosophy, and there are companies which have developed quality independent forms. However, many companies may have to reconsider their positions for competitive or expense reasons. Competitively speaking, it can be to a company's advantage to have a full stable of personal lines products. Permitting another source to offer an umbrella to their accounts may be a foothold into valuable pieces of business. Further, maintaining independent forms can be quite time-consuming and expensive. Companies with their own forms have the task of continually monitoring competitors in order to make sure their forms are comparable (or maintain an advantage). Such companies also must be able to explain current form differences to their own personnel, their agents and their insureds. Therefore, adopting a program could be a more efficient use of a company's personnel. Such considerations would be a moot point to companies that subscribe to other policy form providers that already offer a full personal lines program, such as the American Association of Insurance Services (AAIS).

While the concept of umbrella coverage has always been to handle catastrophic exposures, such policies originated as a commercial specialty product. Later, it was used to handle the "deep pocket" liability exposures of wealthy individuals and those in high profile professions such as entertainers, doctors, lawyers, politicians and professional athletes. Ironically, the niche of customers that spurred the coverage's expansion into a personal lines product then became an area that soon was avoided through underwriting practice and later excluded as part of most contracts. Umbrellas continued their evolution as a common product in response to the growth in the number of lawsuits and the trend of higher jury awards. Finally, insurers recognized how many more persons faced the possibility of causing damages that either would exceed the liability limits or just not be covered by primary (or underlying) auto or homeowners policies. A minor event can create a huge liability.

Example: Carl Ruffshot is practicing putting in his backyard when, frustrated by his poor results, he rears back and smashes the next ball. The ball sails toward a nearby street where a construction crew is working on excavations. Carl's ball crashes through the cab window of a new crane, striking the crane operator. The operator loses control, the crane tips over into a hole and the crane arm falls, destroying several vehicles and injuring a dozen drivers and passengers. It turns out to be Carl's most expensive golf lesson (though he was able to recover his ball).

The ISO PUP shares the goals of nearly all personal excess coverage since it is designed to do the following:

* act as a source of additional coverage which increases a person's protection above the limits of liability provided by an individual or family's personal auto, homeowners and personal liability policies and endorsements and

* provide broader coverage to protect against liability exposures that are not covered by underlying policies such as personal injury or certain non-owned exposures

An umbrella operates in conjunction with a set of underlying policies, so the terms used by the various policies should work together in order to provide the anticipated coverage. This is particularly important regarding the terms that are defined within the policies.


The ISO Personal Umbrella Liability Policy includes some of the same definitions that are found in the '98 edition of the ISO Personal Auto Policy and the '91 edition of the ISO Homeowners 3 Special. However, some terms have different definitions and there are also some terms that are unique to the PUP.

Identical definitions--the PUP, PAP and HO3 define the following terms exactly the same way: "We" and "Us"; Bodily Injury"; "Property Damage"; "Business."

Further, both the PUP and the HO3 contain the same definition for "occurrence."

Different definitions--While the PUP and the HO3 share the same definition for "You" and "your," the PAP has a broader definition. The PAP considers a spouse who has moved into a new residence (due to separation or divorce) to be an insured for up to 90 days after the move. Therefore, a separated spouse might be covered for a very large loss under the primary auto policy but not be protected by a PUP.

Some problems may arise in the coverage and exclusion sections of the PUP.

Both the PUP and the PAP consider private passenger autos, pickup trucks or vans which are in the custody of an insured under a written lease for at least six months to be "owned" vehicles and eligible for coverage. But there is an area of concern. The ISO Personal Auto Policy provides coverage for "your covered autos" and included in that definition is "any vehicle shown in the Declarations" and "newly acquired autos." The "newly acquired auto" definition includes private passenger autos, pickup trucks and vans (as long as the pickup truck or van is used for personal reasons only and weighs 10,000 pounds or less).

The Personal Umbrella uses the term "auto," which is defined as:

A private passenger motor vehicle, motorcycle, moped or motor home or, while towed by a private passenger motor vehicle, a trailer, farm wagon or farm implement. The umbrella's use of the term "auto" is broad because it also includes mopeds, motor homes and motorcycles. Of course this is necessary because of the need for the form to provide coverage in excess of the underlying liability limits of more than just an auto policy. However, focusing just upon the intent of offering excess auto liability coverage, the umbrella's definition of "auto" does not include a reference to pickup trucks or vans, but rather to the undefined term private passenger motor vehicle. The use of this term could cause confusion for several reasons.

Since it's an undefined and uncommon term, its meaning could be interpreted in a variety of ways:

It creates uncertainty because the term is not consistently used in parts of the policy where it might be interpreted as a substitute. For instance, is a moped, motorcycle or motor home a private passenger motor vehicle?

Any misunderstanding or uncertainty regarding the term becomes inherent in any portion of the policy which includes a reference to the defined term "auto." Therefore some problems may arise in the coverage and exclusion sections of the PUP.

Even if the term is intended to be another way to include pickup trucks and vans, there's no reference to gross vehicle weight, so vehicles which are much heavier than intended may be included in coverage.

The policy makes a specific reference to private passenger autos, pickup trucks and vans in its definition of vehicles considered to be "owned vehicles" when possessed under a long-term, written lease.

An argument may be made that a vehicle's use as well as type can qualify it for coverage under the PUP. For instance, can the term eliminate any of the following?

* a privately owned, full-sized bus from coverage if it is used to transport a large group of friends to a sporting event and no fees are charged for the transportation

* a lawn tractor used to clear snow from a driveway or adjacent streets

* a privately owned van with a gross vehicle weight of 13,000 pounds

* a motorized vehicle that operates on the water or in the air

Another difference in definition between the PUP and the PAP and HO3 has to do with family members. (As an aside, the following should be considered in the light of how likely, in a claims situation, will company personnel care or bother to ask whether a younger insured is an insured's birth child or an adoptee?) In the PUP "family member" refers to a household resident who is:

* a relative, including a ward or foster child

* a person younger than 21 who is in the care of an "insured" who is at least 21 years old

umbrella.2 The ISO Personal Auto Policy(06 98 edition) defines "family member" as a person related to you by blood, marriage or adoption who is a resident of your household. This includes a foster child or ward.

The HO3 does not refer to family member, but "insured" and the term is defined as:

you and residents of your household who are:

a. Your relatives; or

b. Other persons under the age of 21 and in the care of any person named above.

Because of the difference in definitions, a distinction may exist among the three programs regarding the status of an adopted child. While adoptees may be commonly thought of as a relative, the status of relative is conferred legally, similar to the (usually temporary) ward or foster child situation. Therefore, a 22-year-old college student who was adopted and is living with his/her adoptive parents may be considered a "family member" under a personal auto policy, but not under a personal umbrella policy. The situation is less clear under the HO3 as its reference to relatives may be interpreted to include adopted children.

Of course, such persons can still gain coverage status under other policy definitions, such as the adoptee mentioned earlier who is operating his parents' covered auto. In this instance, coverage may exist under the umbrella for a driver operating a covered car with an insured's permission. However, what if an auto-related liability arises under different circumstances? This difference could cause unwanted application of both coverages and exclusions.

Example: Chris Ramblun is 22. He was adopted by George and Lori Ramblun as an infant. Chris attends an out-of-state college and is listed as a part-time operator on his adoptive parents' ISO PAP. He misses the last Greyhound bus that was to take him home for his parent's 25th wedding anniversary. Desperate to get home to the family celebration (and without telling his parents) Chris uses his mom's "emergency" credit card and rents a car. Chris feels great about the rental decision; he's making terrific time, right up until the point where he cuts off a car too quickly while changing lanes on a very crowded interstate. He sideswipes one car and creates an 11-car pileup. A number of cars are very heavily damaged and, worse, eight drivers and passengers are hospitalized for various serious injuries including possible paralysis.

The good news is that his parents' PAP will provide coverage. However, any damages above the PAP limits aren't insured by the Rambluns' ISO PUP policy as, per policy definitions, Chris is neither an insured nor a permitted operator of the non-owned car.

Special Definitions--Several terms have special meaning which control how coverage applies under the Personal Umbrella Policy. The policy includes the following terms:

"Fuel system"; "Insured" (note that we did previously discuss portions of this term earlier); "Personal injury"; "Recreational motor vehicle"; "Retained limit"; "Underlying Insurance."

Fuel system refers to:

* one or more containers (of any type) which have a capacity of 100 or more gallons of liquid fuel which either did or do exist on an insured location and are used for heating/cooling, heating water, cooking food or powering motorized vehicles, watercraft or land conveyances

* motors, nozzles, gauges, pipes, hoses or apparatus attached to the defined fuel containers

* filler pipes and flues connected to the defined fuel containers

* boilers, furnaces or water heaters, including any fittings and pipes, which are supplied by to the defined fuel containers

* any structure that is specifically designed and built to hold the liquid fuel that escapes from any defined fuel container

Example: Nancy Skylorn has a large home on 30 acres which used to form the heart of one of the largest farms in Kornking County. Nancy retired from accounting a few years ago and now she indulges in her favorite hobby of flying her own plane. She even added a small landing strip on her property. Next to the large barn, which she converted into a hangar, is a free-standing, 200 gallon tank for plane fuel. Nancy has separate coverage for her plane. She is also covered by an ISO special form homeowners policy and an ISO personal umbrella.

One day, Nancy is in a hurry to get to a sky show where she was asked to perform a stunt exhibition. Nancy quickly fuels her plane and leaves. She forgets to properly store the fuel hose. Several hours later, Nancy returns and stores her plane in its hangar. As she leaves, the wheels of her car snag the hose, it gets tangled and the force pulls the hose out of the tank. Fuel spews out, flooding the area surrounding the hangar. A county official inspects the accident and Nancy is told that she must have several tons of the contaminated earth dug up and removed. Since the fuel was used for fueling a plane, a use that is not mentioned in the definition of a fuel system, the liability arising from this loss may be covered by the PUP.

Insured refers to the person named on the Declarations, a "family member," and any person using an "auto," "recreational motor vehicle," or watercraft that is either owned by the named insured or is a temporary substitute for an insured's vehicle or craft. Entities, to the extent of their legal liability created by an insured's use of a covered auto, are also insureds. The term extends to animals owned by an insured. However, two classes of entities are specifically excluded under the term:

* the owner/lessor of either an "auto" or a "recreational motor vehicle" which is loaned or rented to an insured

* any entity which has custody of an insured's animal as a result of a "business" or without an insured's permission

Personal Injury means injury resulting from any of the following:

* falsely arresting, imprisoning or detaining someone

* malicious prosecution

* wrongful evictions or entry, invasions of privacy

* slandering, disparaging or libeling another entity

* violating another person's privacy rights

Recreational motor vehicle includes all-terrain vehicles, dune buggies, golf carts, snowmobiles or any other motorized land vehicle that is meant for off-the-road recreation.

Retained Limit means the total of the limits which exist for any "underlying" or other insurance that is available to an insured (including coverage which would have been available if the insurer providing the underlying insurance had not become bankrupt or insolvent). Retained limit also means the deductible that is shown on the declarations page. The specified deductible applies when a loss occurs that qualifies for coverage under the PUP and is not covered by any other source of coverage.

Underlying insurance refers to any source of primary liability insurance which protects an insured against the types of liabilities listed on the declarations and for no less than their accompanying limits.


The ISO Personal Umbrella Liability Policy provides coverage under its insuring agreement and for the expense to defend an insured. The insuring agreement obligates the insurer to pay for bodily injury and property damages or other offenses that exceed the "retained limit." The insurer must also respond to an insured's legal liability stemming from personal injury offenses. Prejudgment interest awards are also eligible for payment under damages.

Regarding defense coverage, the insurer will pay the cost to defend an insured against lawsuits, even when a suit or allegation has no merit, with the following limitations:

* the source of the suit must be the result of damages or offenses that are eligible for coverage under the PUP

* the insurer doesn't have to defend in an instance:

when coverage is provided by underlying insurance

the claim is not covered by underlying insurance, but the amount is less than the policy's deductible

The insurer also may join in the defense of a claim which has the potential to exceed the underlying carrier's limits (but without contributing to the primary carrier's defense costs).

The umbrella provider must pay any legal expense incurred by an insured because a different country's laws or regulations prevent it from defending an insured.

The insurer may also choose to investigate or settle any claim it decides is appropriate. The company's obligation to provide any defense ends when it pays out its limit.

The umbrella policy also provides the following additional coverages:

* the company pays for any taxes levied on the insured for the cost of defending a claim

* payment of premiums for claims-related bonds, up to the policy's limit

* pays up to $250 daily for an insured's expenses which are related to a covered claim

Finally, the umbrella insurer is obligated to pay its share of interest on any judgment, but not including the portion of interest on the sums that exceed the policy's limit.

Let's examine the exact wording of the first part of the PUP insuring agreement. It states:

We will pay damages, in excess of the "retained limit" for:

1. "Bodily injury" or "property damage" for which an insured becomes legally liable due to an "occurrence" to which this insurance applies.

It appears that the policy's intent is to act as excess coverage over the "retained limit" which is defined (in part) as:

"1. The total limits of any "underlying insurance" or any other insurance that applies to an "occurrence" or offense which:

a. Are available to an "insured"; or

b. Would have been available except for the bankruptcy or insolvency of an insurer providing "underlying insurance";..."

This writer believes that this portion of the insuring agreement could be ambiguous. It appears that the policy's intent is to provide coverage that is excess over two situations. The first covered situation is to extend the coverage of the primary insurance policies such as auto, homeowners, recreational vehicles and similar policies that would appear on the declarations page, with a set of required limits. The second covered situation is when there exists a valid source of coverage for an exposure that is not listed on the Declarations but which applies to a loss on a primary basis.

Example: Jane Sportsknut is covered by an ISO PAP, HO3 and PUP policy. Jane has always loved volleyball, and she jumped at the chance to act as a coach of her daughter's sixth grade volleyball team. Jane files a claim to protect her against a lawsuit involving her actions during a serious brawl that occurred during a city-wide volleyball tournament. The PUP insurer delays involvement in the lawsuit because a special events policy was purchased for the tournament and coaches are covered by the policy on a primary basis.

However, a third situation that was not intended to be covered may also qualify under the PUP. Since the definition of "retained limit" includes the wording: "The total limits of any 'underlying insurance' or any other insurance," the PUP may also extend on an excess basis for a primary policy with limits which are lower than those shown on a declarations page.

Example: George Pennypincher, a 74-year-old driver, owns a six-month term PAP policy written by Company A and a one-year term PUP policy written by Company B. The PUP declarations page shows that the PAP insurance limit is a $500,000 combined single limit. When the PAP comes up for renewal (and it is the auto policy's anniversary date), Company A advises George that the auto policy can be renewed for only $300,000 CSL since he has reached age 75. Since George has been with the company for years and does not believe he could get a better deal elsewhere, he agrees with the renewal change.

In this instance, why wouldn't the PUP insuring agreement apply on an excess basis over the $300,000 CSL auto policy as the change in limit appears merely to have transformed the auto policy from "underlying" to "other" insurance? (Editor's note: This example is discussed again later under the section on maintenance of "underlying insurance."

Limits of liability

This applies under the PUP in the same manner as other ISO products.


The items not covered by the ISO Personal Umbrella Policy should come as no surprise to insurance professionals who are familiar with ISO policies. Let's review them (briefly) using the same numbering as they appear under III. Exclusions:

1. "Bodily injury" or "property damage" due to an intentional act is not covered. The umbrella exclusion's wording attempts to clarify itself by mentioning that the exclusion extends to harmful consequences that differ from what the individual may have thought would happen.

Example: Ben Flaky is traveling along an interstate highway on his way to work and after a horrible weekend and nightmarish morning, he's in a terrible mood. Ben has to slam on his brakes to avoid hitting a car that cuts him off while merging onto the road. Ben, looking for some "payback," rushes up to the driver's rear bumper and continuously honks his horn. The other driver, who was oblivious to having cut Ben off, is startled by the sudden noise and loses control of his car. The startled driver swerves across two lanes and causes a serious pileup, including Ben's car. When Ben's umbrella insurer gets information on the claim from the underlying auto insurer, it advises Ben that the umbrella won't provide coverage, even though Ben merely intended to "shake up" the person who cut him off.

The exclusion of intentional harm does not apply when the damage is the result of defending oneself or protecting others when threatened by another party.

2. There is no coverage for "personal injury" when it involves any of the following:

* when the insured knows that the information that's being spread is not true

* when the information creating the claim was spread before the inception date of the umbrella policy

* a criminal act either by or at the direction of the insured

* a claim created by an act related to the insured's job

3. Losses stemming from rental of the insured premises also are excluded. However, as exceptions, coverage is extended to the following situations:

a. when the situation involves:

* occasional renting out the insured premises for use as a residence. (For instance, the Jones family goes for a two-week vacation and during that period rents its home to a family that is vacationing in their town.)

* rental of part of the insured premises as a residence, even if on a long-term basis. However, the situation is excluded if rental occurs to more than two roomers or boarders.

* partial rental of the insured premises for use as a school, private office, private garage or studio

b. when the personal liability is covered by the underlying insurance for renting a structure other than the insured's residence

c. where the underlying insurance provides coverage for a secondary or seasonal residential condo, co-op or apartment

4. The PUP excludes all damages connected to an insured's business, including professional services. The exclusion makes exceptions for:

a. an insured's public or civic functions that involve no more than reimbursement of expenses

b. the occasional or part-time business pursuit involving minors

c. home day care that represents a mutual exchange of similar service or when a covered person is caring for a relative

d. when an insured uses a covered auto in connection with selling, repairing, servicing, storing or parking vehicles made for use on public roads

e. the use of an auto for business purposes, unless it is used to transport person or property for income

5. The PUP excludes a loss that's related to professional services

6. There is no coverage under the PUP for aircraft-related "bodily injury" or "property damage." This exclusion includes allegations of negligent entrustment or from vicarious liability.

7. There is no coverage under the PUP for watercraft-related "bodily injury" or "property damage." This exclusion includes allegations of negligent entrustment or from vicarious liability except coverage does exist to the extent of any underlying coverage.

8. There is no coverage under the PUP for recreational motor vehicle-related "bodily injury" or "property damage." This exclusion includes allegations of negligent entrustment or from vicarious liability except coverage does exist to the extent of any underlying coverage.

9. Losses with any connection to war, and warlike act, including the discharge of a nuclear device, are not covered.

10. The PUP excludes losses involving a covered vehicle or watercraft that's operated without an insured's permission, but this does not apply to any "family member." (Note: the example we used earlier in this article concerning a rental vehicle used by an adoptee could be a an unintended extension of this exclusion.)

11. Except for sailboats and log cruises, any use of a vehicle or watercraft in an organized race or competition is excluded.

12. Coverage for "bodily or personal injury" suffered by an insured is excluded by the PUP.

13. The PUP denies coverage for losses related to communicable diseases, sexual molestation, corporal punishment, abuse and unauthorized or illegal activity involving controlled substances.

14. Coverage for any damages connected to an insured's actions as a corporate or organization officer or director is excluded unless the only compensation is a reimbursement of expenses.

15. No coverage is available under the PUP for damage to an insured's property.

16. Unless the damage is caused by fire, smoke or explosion, no coverage is extended for damage to property that is in the custody of the insured.

17. The PUP does not cover "bodily injury" losses when the person suffering the loss should be reimbursed under a workers comp, non-occupational disability or occupational disease law.

18. Coverage is excluded under the PUP for an insured whose "bodily injury" or "property damage" losses should be protected under a nuclear energy liability policy.

19. Liability under the PUP is denied for "bodily injury" or "property damage" losses due to fuel escaping a "fuel system."

20. No coverage is provided for "bodily or personal injury" damages connected to the absorption, inhalation or ingestion of lead.

21. Finally, the PUP excludes "personal injury" or "property damage" losses caused by lead contamination.

There are two other areas where coverage under the PUP is denied. No coverage is provided for loss assessments to an insured as a member of any form of organization of property owners. Finally, the umbrella does not extend excess or first dollar coverage for losses involving either no-fault or uninsured/underinsured motorist liability unless the policy is explicitly added by endorsement.

Exclusion 4. may be of particular interest. The policy specifically states:

The coverages provided by this policy do not apply to:

4. "Bodily injury", "personal injury" or "property damage" arising out of or in connection with a "business" engaged in by an "insured." This exclusion (A.4.) applies but is not limited to an act or omission, regardless or its nature or circumstance, involving a service or duty rendered, promised, owed or implied to be provided because of the nature of the "business."

However, this Exclusion (A.4.) does not apply to:

a. Civic or public activities performed by an "insured" without compensation other than reimbursement of expenses:

b. An insured minor involved in self-employed "business" pursuits, which are occasional or part-time and customarily undertaken on that basis by minors. A minor means a person who has not attained his or her:

(1) 18th birthday: or

(2) 21st birthday if a full-time student:

c. The providing of home day care services, but only when:

(1) An "insured" renders such service to a relative of an "insured": or

(2) A mutual exchange of home day care services agreement exists which involves no monetary or other compensation..."

d. The use of an "auto" you own, or a temporary substitute for such "auto," by you, a "family member" or a partner, agent or employee of you or a "family member" while employed or otherwise engaged in the "business" of:

(1) selling; (2) repairing; (3) servicing; (4) storing; or

(5) parking vehicles designed for use mainly on public highways;

e. The use of an "auto" for "business" purposes, other than an auto business, by an "insured." However, we do not provide coverage for liability arising out of the ownership or operation of an "auto" while it is being used as a public or livery conveyance. This Exclusion (A.4.e) does not apply to a share-the-expense car pool.

Concerning the exceptions to exclusion A.4., item a. should be unnecessary since civic or public activities should not fall under the "business" definition (further, it may be redundant since exclusion A.14 addresses the exposure). Item b. appears to exclude business-related exposures by adults. Coverage is provided for business activities involving non-adults as long as the activity is common to minors and is done on a part-time basis. Since most minors are full-time students, nearly any "business" activity should qualify as a part-time venture.

However, a question exists about what type of "business" activities are common to minors. It would be interesting to examine the circumstances of a claim that's denied because the activity is considered uncommon. Youths have different areas of interest and greater access to technology, so they may have gone far beyond the days of baby-sitting and mowing lawns. In this writer's opinion, the following may be examples of "business" activities which may qualify for coverage:

* A 20-year-old college student who lives in the insured household and charges for tutoring high school students in math and language

* A 17-year-old who delivers pizzas

* A 16-year-old with a newspaper route

* A 15-year-old who baby-sits after school, during weekday evenings and on weekends

* Minors under 18 or full-time students under 21 who:

--sell door-to-door as a summer job

--work as lifeguards at a beach or pool

--mow lawns or perform snow removal

--perform house-sitting or house-cleaning services

--give lessons in music, arts or crafts

--perform at parties as a "disc jockey" or in a band

--use a covered auto in a messenger or courier service

--operate an interior/exterior painting service

--design Web sites, for individuals and businesses

--offer sports instructions or assist at (vacation or summer) sports camps/clinics.

Example: Bill and Marge Modum are insured by an ISO Personal Umbrella Policy. Their son, PC (who is 16 years old), designs and maintains Web sites. The Modums are sued by:

* a group of parents who find out that he is responsible for designing and posting the content of a Web site that advertises a fictitious escort service consisting of cheerleaders from his high school.

* a competitor of a "temporary employee" business for which PC designed a Web site. The site states that the competitor uses unqualified workers.

One of PC's clients, six months after the site was published, discovers that the site had the wrong mailing, fax, e-mail and phone numbers. They claim a substantial loss in income since their Internet service provider's records show that the site gets hundreds of visitors each week.

Regarding exceptions d. and e. of Exclusion A.4., their meaning may be subject to greater interpretation in light of our previous discussion about how the policy defines "auto."

Let's look at a few other sections of the ISO Personal Umbrella Liability Policy.

Section IV: Maintenance of Underlying Insurance

This portion of the policy obligates an insured to maintain the "underlying" insurance, not to change coverage to a more restrictive basis, and to notify the insurer if any portion of the "underlying insurance" is lost and is not replaced. If "underlying insurance" coverage is lost, the total limit of liability available under the PUP remains the same.

Let's take another look at the example discussed earlier--George Pennypincher, the 74-year-old driver and long-time insured, to see how his situation might be affected by the maintenance provision. Pennypincher has a six-month term PAP policy written by Company A and a one-year term PUP policy written by Company B. The PUP declarations page shows that the PAP insurance limit is a $500,000 combined single limit. When the PAP comes up for renewal (and it is the auto policy's anniversary date), Company A advises George that the auto policy can only be renewed for $300,000 CSL since he has reached age 75. Since George has been with the company for years and does not believe he could get a better deal elsewhere, he agrees with the renewal change.

In this instance, why wouldn't the PUP insuring agreement apply on an excess basis over the $300,000 CSL auto policy as the change in limit appears merely to have transformed the auto policy from "underlying" to "other" insurance?

In George's case, has he violated the policy provision? On the face of things, perhaps, but maybe not. George did not change his policy limits; he conceded to Company A's requirement. Did the change result in more restrictive coverage? Was the coverage nonrenewed or terminated? No, no and no. George has the same breadth of coverage, just for a lower limit of primary coverage.

Note that, while an insured is required to notify the company if coverage is lost, there's no mention of notification if coverage becomes more restrictive (in case the policy's intent was to include a lower coverage limit as a restriction). Further, if an insured loses coverage and immediately notifies the company, what then? Is that considered to be a courtesy and the insured must try to find replacing coverage, or has the insured complied with this provision and may now rely on the umbrella coverage to "drop down" and provide the needed protection up to the PUP's limit of insurance?

Section V. Duties After Loss

This section appears to be similar to those used in other policies and mentions the need for the insured to give prompt notification, provide adequate loss details, forward important papers, etc.

General Provisions

The PUP provisions are, in most cases, very similar (and sometimes identical) to those found in other ISO policies. The provisions are:

A. Appeals: The umbrella insurer reserves the right to appeal a judgment that exceeds the "retained limit," but at its own expense. Such expenses would be in addition to the policy's limit of insurance.

B. Bankruptcy of an Insured: These economic events will neither absolve the umbrella insurer of its duty to provide coverage, nor will they cause the excess policy to act as primary insurance.

C. Bankruptcy of an Underlying Insurer: Regardless of such an occurrence, the excess policy will still respond as though primary coverage were in effect.

D. Fraud: An insured's fraudulent statements or acts could block coverage for a loss.

E. Liberalization Clause: Similar to such clauses found in other policies.

F. Other Insurance: Similar to such clauses found in other policies.

G. Our Right To Recover Payment: Simpler wording than the PAP provision, but with the same purpose, the right to subrogate.

H. Policy Period And Territory: Similar to such clauses found in other policies.

I. Severability Of Insurance: Similar to such clauses found in other policies.

J. Suit Against Us: Similar to the PAP Legal Action Against Us clause.

K. Termination: Similar to such clauses found in other policies.

L. Transfer Of Your Interest In This Policy: Similar to such clauses found in other policies.

M. Waiver Or Change Of Policy Provision: The policy's provisions may be changed only by a company-issued endorsement, and any premium adjustment is made effective the date of any change.


The ISO program also has several endorsements for use with the Personal Umbrella:

DL 98 10 06 98--Personal Umbrella Liability Policy Change Endorsement

This is merely a form to facilitate making a policy change after the Umbrella Policy has been issued.

DL 98 11 06 98--Personal Umbrella Liability Policy Auto Liability Exclusion Endorsement

This form should be used with insureds who need an umbrella but don't have any auto liability exposure. When this endorsement is attached to the umbrella policy, it excludes any "bodily injury" or "property damage" loss that is related to an insured's ownership or operation of an "auto," including any liability stemming from negligent entrustment or vicarious liability. However, the exclusion makes exceptions for trailers (as long as they're not towed or carried by an "auto") as well as for "autos" which don't need to be registered and which are either in dead storage, made to assist handicapped persons or are used to service the insured's residence.

DL 98 12 06 98--Personal Umbrella Liability Policy Auto Liability Following Form Endorsement

This form excludes coverage for automobile liability on the same basis as the DL 98 11 06 98--Personal Umbrella Liability Policy Auto Liability Exclusion Endorsement. However, the form then adds this excess coverage back, but only according to the manner that such coverage is provided by the policy owner's primary auto liability policy.

DL 98 13 06 98--Personal Umbrella Liability Policy Exclusion--Designated Auto Endorsement

This form excludes coverage for automobile liability on the same basis as the DL 98 11 06 98--Personal Umbrella Liability Policy Auto Liability Exclusion Endorsement. However, the exclusion applies only to the vehicle(s) specifically listed on the endorsement. While this form may be viable if excess coverage is to be denied to an exposure that is covered on a primary policy, if a vehicle is excluded by the primary policy, it may make more sense to use the following form endorsement.

DL 98 14 06 98--Personal Umbrella Liability Policy Exclusion--Designated Recreational Motor Vehicle Endorsement

This form excludes coverage for automobile liability on the same basis as the DL 98 11 06 98--Personal Umbrella Liability Policy Auto Liability Exclusion Endorsement. However, the exclusion applies only to the recreational motor vehicle(s) specifically listed on the endorsement.

DL 98 15 06 98--Personal Umbrella Liability Policy Exclusion--Designated Watercraft Endorsement

This form excludes coverage for liability similarly to the DL 98 11 06 98--Personal Umbrella Liability Policy Auto Liability Exclusion Endorsement. However, the exclusion applies only to the watercraft specifically listed on the endorsement.

DL 98 16 06 98--Personal Umbrella Liability Policy Exclusion--All Hazards In Connection With Designated Premises Endorsement

This form excludes coverage for "property damage," "bodily injury" and "personal injury" liability that is connected to the location described in the endorsement. *

The author

Bruce Hicks, CPCU, CLU, is an editor in the Technical and Educational Products Division of The Rough Notes Company, Inc. He has been in the insurance industry since 1981, serving as a personal lines underwriter for several regional and national companies. He also has worked in corporate underwriting with experience in product research and development, auditing, product filings and compliance.

©COPYRIGHT: The Rough Notes Magazine, 1999