Opinion ID: 2453589
Heading Depth: 2
Heading Rank: 2

Heading: Primary and Excess Liability Policies

Text: In general, a primary liability policy provides the first layer of coverage[,] attach[ing] immediately upon the happening of an occurrence or when a claim is made. 1 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition § 1.06[7] (Dec. 2010); 1 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 1:4 (3d ed. 2010) (defining a primary insurer as an insurer whose coverage of a given loss is at the `first level' of loss (after satisfaction of any deductible); counterpart of excess insurer). A primary liability policy that covers automobiles or motor vehicles protects the insured from liability for damages arising from the ownership, maintenance, or use of specific automobiles. In other words, if an insured is at fault in an automobile accident, the insurer covers an injured third party's damages beyond the insured's deductible, up to the limits of the insured's automobile liability coverage. Here, the automobile liability insurance coverage under the Allstate auto policy serves as primary liability coverage. By contrast, excess and umbrella policies protect the insured in the event of a catastrophic loss in which liability exceeds the available primary coverage. 15 Couch on Insurance § 220:32. An excess liability policy pays benefits only after the limits of the primary or underlying insurance policy have been exhausted. 1 New Appleman on Insurance Law Library Edition § 1.06[7]; see also 1 Couch on Insurance § 1:4 (defining an excess insurer as an insurer whose coverage of a given loss is activated only after the magnitude of the loss exceeds the limits of applicable `primary' insurance). Excess liability policies assume the less frequent risk that an insured will be liable for a judgment that exceeds the primary policy's limits. Accordingly, excess liability policies carry lower premiums that reflect the lesser magnitude of this risk. See Trinity Universal Ins. Co. v. Metzger, 360 So.2d 960, 962 (Ala.1978). An umbrella policy is a distinct type of excess liability policy. However, in addition to providing excess liability coverage, an umbrella policy typically also provides primary coverage for certain risks that an underlying liability policy does not cover. See 15 Couch on Insurance § 220:32. In that sense, an umbrella policy may act as a gap-filler by providing first dollar liability coverage where a primary policy and an excess policy do not. 1 New Appleman on Insurance Law Library Edition § 1.06[7] (quoting Douglas R. Richmond, Rights and Responsibilities of Excess Insurers, 78 Denv. U.L.Rev. 29, 31 (2000)). With respect to automobiles, the umbrella policy in this case only provided excess liability coverage for occurrences arising from the ownership, maintenance, or use of a land motor vehicle, and required the policyholder to maintain underlying automobile liability coverage with minimum limits of $100,000 per person and $300,000 per accident.