Umbrella Follow Form
The Umbrella Liability policy can either be a stand-alone or a follow-form policy. To understand this concept, let's dive in the differences between each one.
Stand-alone Policy
A stand-alone policy is characterized by having all of its own terms, conditions, limitations, and exclusions. In other words, the coverage provided by the underlying policies does not affect the Umbrella Policy – the coverage is determined solely by the wording found in the Umbrella Policy.
Follow-form Policy
A Follow Form Umbrella policy is characterized by incorporating into the Umbrella the terms and conditions found in the listed underlying policies – the coverage is determined by the extent of coverage provided in the underlying policies.
The picture below shows exactly how a Follow Form Umbrella policy works:
Follow Form Requirement
Sometimes, Umbrella Liability will be required on a Follow Form basis, like in the examples below:
The simplest way of making this requirement compliant is ensuring that the coverage explicitly states that Umbrella follows form:
This verbiage, or any acceptable alternatives, won't always be mentioned in the DOO. So, another way of making the follow form requirement compliant is to check if Umbrella has the same required provisions as the General Liability policy*.
- The provisions considered as an alternative to Follow Form wording are Additional Insured, Primary and Non-Contributory and Waiver of Subrogation, when required for General Liability*.
- 1st step: Check which one of these 3 provisions/endorsements** are required for General Liability.
- 2nd step: Check if Umbrella covers the same provisions. If it does, follow form will be compliant.
*As mentioned above, although Umbrella must mirror the terms of the underlying policies, most leases do not obligate Umbrella to cover all policies. This is why we only check which provisions are required for General Liability when using this alternative [when Follow-Form wording is not provided in the document].
**Endorsements are never supposed to be enforced for Umbrella unless an auditing note says otherwise, so if GL requires PNC endorsement, for example, just having wording of PNC provision for UL in the COI is sufficient.
Acceptable Alternative Verbiages
Apart from the standard "Umbrella follows form" there are other acceptable alternative verbiages, such as the ones mentioned below:
- Excess follows form over General Liability.
As mentioned above, UL following form over GL is enough.
- Umbrella follows above policy extensions.
Extensions in this case would mean the same as forms.
- The Policy follows the terms and conditions of such Underlying Policies.
Whenever it says Umbrella is subject to the same terms, conditions, forms, etc. as the Underlying Insurance it is the same as follow form.
- Umbrella follows form to the underlying policies as respects to Additional Insureds subject to the terms, conditions, and exclusions of the policy.
What validated this verbiage is the "subject to the terms, conditions, and exclusions of the policy" part. If it referred to the Additional Insured alone: "Umbrella follows form to the underlying policies as respects to Additional Insureds", it wouldn't be enough.
- Evidence of follow form on endorsements.
In this case, the endorsement in question is not a follow-form endorsement, but it contains the necessary evidence in the subheading, which is also acceptable.
- Umbrella Liability follows form & extends to Additional Insured & Waiver of Subrogation status of the underlying General Liability, Auto Liability& Worker's Compensation policies.
Here, the Additional Insureds are on a PNC basis and UL follows form over the AIs, so we do have PNC coverage for UL, therefore this is enough for the follow form requirement (UL has AI, PNC and WoS coverage.)
Non-Acceptable Alternative Verbiages
The following verbiage may seem like an equivalent to the standard one, but they are NOT acceptable:
- Commercial Umbrella follows form according to the terms conditions and endorsements found in the Commercial Umbrella Policy.
Umbrella is a stand-alone policy here, the opposite of follow form because coverage is determined solely by the wording found in the Umbrella Policy. Or it might be an indication of two UL policies, one following the other.
- The Excess is Follow Form pursuant to form CU0001.
Although the provided code is incomplete, the only endorsement checked on our index is CU0001 04 13, in which AI is covered but PNC and WoS are not. The resolution for such a case will depend on the requirements:
- If only Follow Form is required for UL, it is compliant as long as PNC and WoS aren't required for GL.
- If only Follow Form is required for UL and PNC and WoS are required for GL, mark the gap for Follow Form.
- Make sure these provisions aren't given for UL via WoS checkbox and PNC verbiage on DOO before flagging the gap.
- if PNC and WoS are also required for UL, Follow form is compliant but PNC and WoS will be gaps.
- Umbrella/Excess Liability extends over General Liability, Automobile Liability and Workers' Compensation/Employer's Liability policies.
This statement only means that Umbrella covers the limits of GL, AL and EL.
Follow Form Vs. Underlying Policies
It is an industry standard that Umbrella covers the three main Liability policies: General Liability, Automobile Liability, and Employer's Liability. When a policy is covered by Umbrella, they're an underlying policy and that means the Umbrella limits can be used to satisfy its limits as a second layer of coverage. It is not the same as a Follow Form policy. So even when Umbrella is following form over General Liability or Automobile Liability, it still can have other underlying policies.
If Umbrella 'follows form' a policy, can I assume this policy's limits are covered by Umbrella, meaning it's also an underlying policy?
As previously mentioned, when you have an underlying policy of Umbrella, that doesn't mean UL automatically follows the terms and conditions of this policy (aka follows-form). But it's important to highlight that an Umbrella policy can only follow form policies that are also underlying.
So, YES! If a COI states that Umbrella follows form over a policy that is not typically covered by it, you can conclude that this policy is an underlying policy as well.
In the image below, we have evidence of Umbrella Follow Form for General Liability and Liquor Liability, so we can assume that UL covers the limits of both GL and Liquor.