OGC Opinion No. 04-02-20: Commercial Umbrella Insurance Policy

OGC Op. No. 04-02-20

The Office of General Counsel issued the following opinion on February 19, 2004, representing the position of the New York State Insurance Department.

RE: Commercial Umbrella Insurance Policy

Question Presented:

1) May a commercial umbrella insurance policy exclude coverage for automobile liability insurance?

2) N.Y. Codes R. & Regs. tit. 11, § 161.1(d) (Regulation 129) states in part: "With respect to losses not covered by underlying insurance, the policy shall require an insureds retention of risk, and be excess over, at least $10,000 per accident or occurrence." What is meant by the wording "with respect to losses not covered by underlying insurance?"

Conclusions

1) A commercial umbrella insurance policy may not exclude coverage for automobile liability insurance.

2) It is the intention of the regulation to describe an umbrella policy as one that provides coverage over both automobile liability insurance and general liability insurance. Thus, "losses not covered by underlying insurance" refers to losses not covered by the underlying insurance policies because such coverage is excluded or not contemplated by the policies.

Facts:

The inquiry was general in nature and no specific facts were provided.

Analysis:

N.Y. Codes R. & Regs. tit. 11, § 161.1(d) (Regulation 129) states:

Commercial umbrella policy means a commercial liability insurance policy (except as modified by subdivisions (i) and (j) of this section), written as excess over underlying policies providing standard form general liability and motor vehicle liability insurance issued to and warranted to exist by the named insured, that include coverage limits of at least $300,000 in the aggregate for bodily injury liability; and $50,000 for property damage liability. With respect to losses not covered by underlying insurance, the policy shall require an insureds retention of risk, and be excess over, at least $10,000 per accident or occurrence.

Regulation 129 is a rating regulation. The commercial umbrella definition provided therein is also the one applied by the Department for all general purposes. Prior to its repeal, N.Y. Codes R. & Regs. tit. 11, Part 150 (Regulation 51) had been promulgated for the purpose of suspending the rate filing requirement for commercial umbrella policies, provided that certain conditions were met. Among those conditions were those contained in § 150.1, which stated:

(a) The "umbrella" policy shall require and be written as excess over underlying policies issued to and warranted to exist by the named insured, providing coverage limits of not less than $300,000 for each person and $300,000 for each accident or occurrence for bodily injury liability and $50,000 for each accident or occurrence for property damage liability or $300,000 single limit.

(b) The underlying policies must include at least a standard form general liability policy and a standard form automobile liability policy (or a standard form comprehensive liability policy providing both automobile and general liability coverage) issued to the named insured for at least all coverages which there are rate and rule filings with the Department.

(c) With respect to a loss not covered by underlying insurance, the policy shall require an insureds retention of risk of, and be excess over, not less than $10,000 per accident or occurrence with respect to each accident or occurrence.

At some point, Regulation 129 overlapped somewhat with Regulation 51. At that time, Regulation 129 incorporated the definition of a commercial umbrella policy that was contained in Regulation 51 by reference to it. Section 161.1(d) (Reg. 129) stated: "Commercial umbrella policy has the meaning set forth in Part 150 of this Title (Regulation 51), except as modified by subdivisions (i) and (j) of this section."

Thereafter, Regulation 51 was repealed, and the wording of Regulation 129 was amended to include a definition of a commercial umbrella policy similar to the definition in Regulation 51. Thus, despite a change in wording, it is the intention of Regulation 129 to define a commercial umbrella policy as a policy that provides both general liability and auto liability insurance on an excess basis over the primary insurance.

Hence, a commercial umbrella policy must provide excess coverage over both general liability and automobile liability insurance. A commercial umbrella policy may not exclude automobile liability insurance. It must provide automobile liability coverage, whether coverage is made available for vehicles owned by the insured, or for non-owned or hired vehicles.

N.Y. Codes R. & Regs. tit. 11, § 161.1(d) requires a commercial umbrella policy to set a minimum self-insured retention ("SIR") of $10,000 with respect to "losses not covered by underlying insurance." It is the intention of the regulation to describe an umbrella policy as one that provides coverage over both automobile liability insurance and general liability insurance. Thus, "losses not covered by underlying insurance" refers to losses not covered by the underlying insurance policies because such coverage is excluded or not contemplated by the policies.