In the last issue of Coverage Opinions I discussed Westchester Surplus Lines Inc. Co. v. Keller Transport, Inc., a Montana Supreme Court decision in which the court held that the undefined term “general aggregate,” in an umbrella policy, was ambiguous. Therefore, the general aggregate applied to each type of coverage provided in the primary policy. Hence, it applied twice, since the claim involved both CGL and auto policies, resulting in an insurer being saddled with an additional $4 million coverage obligation.

In the wow, what a coincidence category, it turns out that Craig Stanovich, of Austin & Stanovich Risk Managers LLC (a risk management and insurance advisory consulting firm), published an article in January, with IRMI, in which he discussed – in detail, and at length – the issue of aggregate limits under umbrella policies. Craig’s article looks at several possible ways in which umbrella policies address the aggregate limit issue.

As I’d expect from my years of reading Craig’s work, his article is superb, not to mention that aggregate limits is just one of several umbrella policy issues that he tackles. The article provides a comprehensive, and high-level, discussion of many aspects of umbrella policies.

Craig’s overarching thesis is this – Because umbrella policy proposals often come at the last minute, it is an “eleventh-hour transaction [that] often results in the buyer paying little or no attention to the actual coverage being purchased.” As Craig sees it, “[t]here is a certain irony to giving short shrift to a liability policy that is only important when damages from a liability claim may be in the range of tens of millions of dollars. In other words, it is not advisable to review your umbrella policy or policies for the first time only after being faced with a complaint that alleges liability for damages in the millions of dollars.”

I highly recommend that you check out Craig Stanovich’s excellent piece. You can find it at irmi.com.