Excess Liability Insurance 

Relationship between the commercial general liability and excess insurance policy

 Excess and General Liability Insurance

The purpose of excess liability insurance is to provide additional liability protection for your company above the underlying commercial general liability insurance.  Liability is the protection from a third party who has decided your company is responsible for certain damages.  The first party is the cannabis company, the second party of the insurance carrier, and third party if the claimant.

If for example, a cannabis company has a commercial general liability insurance policy with $1,000,000 per occurrence and $2,000,000 per aggregate this would be known as the underlying insurance policy.  The same cannabis company decides to then purchase an excess liability policy with $5,000,000 limit of liability. 

The excess policy will typically respond when the underlying policy has exhausted their limits of liability.

What key terms you should know?

Most insurance policies begin with what is known as the insuring agreement. Below is a sample excerpt from an excess policy.  The purpose of the insuring agreement is to declare the terms between the insurance carrier and the customer.  The section begins with “We will pay on behalf of the Named Insured….” as a means to notify the the carrier’s intentions.  In this example, the excess policy is following the various terms and conditions of the underlying policy as opposed to leading.

Therefore, if a claim is covered on the underlying policy it will likely be covered on the excess policy.  If a claim is denied on the underlying policy, it will likely be denied on the excess policy.  The excess policy is unlikely to respond to any claim on a stand alone basis.

A. INSURING AGREEMENT

We will pay on behalf of the Named Insured those sums in excess of the “underlying insurance” that you become legally obligated to pay as damages because of injury or property damage to which this insurance applies, provided that the damages would be covered by the “underlying insurance(s)”, but for the exhaustion of the applicable Limits of Insurance.

This policy shall follow the terms, definitions, conditions and exclusions of the “primary insurance” and of any other
“underlying insurance” only to the extent coverage is further limited or restricted by the terms and conditions of such other “underlying insurance”; subject always to the policy period, policy limits, premiums and all other terms, definitions, conditions and exclusions of this policy.

If any provisions of the “underlying insurance” conflict with any provisions of this policy, the provisions of this policy will apply.
This policy will not, in any event, provide broader coverage than that provided by the “underlying insurance”.

Besides the insuring agreement, the insurance policy will be subject to exclusions or situation when coverage may not be offered or severely impacted.  For example, the excess policy may exclude coverage for products and completed operations.   This type of coverage has been notoriously difficult to obtain for the cannabis industry due to the perceived risks of a product being consumed in the marketplace with little history and research. 

Another exclusion in a excess policy may include professional liability.  The removal of this coverage is meant to protect the insurance carrier from incidents involving professional negligence or errors and omissions.  A claim of this nature may arise from a bud tender offering poor advice to a customer who has never consumed an edible or concentrate. 

How is premium determined and limits established?

The cost for insurance is set by the insurance carrier with pricing factors that can be based on revenue or square footage.  Under current market conditions, the amount of coverage offered is up to $10,000,000.  The amount of insurance needed is based on the number of locations, lease agreements, and genuine concern for different types of claims that might occur.

Need More Information? 

Please contact us online for further information.