Unless a business is dealing with a claims frequency issue or needs to satisfy a lender or contractual requirement, the motivation to purchase high umbrella limits through excess layers of coverage, will often be in order to protect against specific claims or class action suits they believe they could be exposed to. Yet, oftentimes, the excess layers may contain additional restrictions of coverage that are not included in the lower levels of coverage they are sitting above, which directly conflicts with the objective of purchasing the coverage. For example, excess layers of liability coverage may be purchased in the nonprofit space specifically for potential abuse and molestation claims, but will often contain exclusions for that very cause of loss despite it being covered on the GL and primary umbrella layer.
For that reason, I was somewhat amused when reviewing an excess layer quote yesterday for a multifamily habitation risk that included, in part, the following exclusions: assault and battery, firearms, animals, infestation, motorized vehicles, water hazard, self-inflicted injury, interior building collapse, and water and fire related injury or damage. In other words, the carrier thought of every possible claim (or class action) that could pierce the excess layer from a single event or claim and excluded it from coverage. In essence, they nearly nullified the purpose of the policy.
As obvious as it may seem, care should be taken to ensure that the motivation behind purchasing a policy is properly addressed by the policy being purchased.