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Form CU DS 01: Commercial Liability Umbrella Declarations

The CU DS 01 Commercial Liability Umbrella Declarations is a critical document in commercial insurance. It acts as the personalized cover page for the Commercial Liability Umbrella Coverage Form (CU 00 01), providing a snapshot of the specific agreements between the insurer and the named insured. This form is not a standalone policy but rather an integral part of the umbrella policy, detailing the unique aspects of the coverage purchased.

What the form is:

The CU DS 01 serves to officially declare the key components of the commercial umbrella liability policy. Its primary purpose is to clearly identify:

• Named Insured: The individual(s) or entity(ies) covered by the policy. The order in which multiple named insureds are listed can be important, as the first named insured often has specific responsibilities like premium payment and receiving policy notices.
• Policy Period: The dates during which the coverage is in effect, typically commencing at 12:01 A.M. at the named insured's mailing address.
• Limits of Insurance: This section specifies the maximum amount the insurer will pay for a covered loss. This usually includes an "Each Occurrence Limit" and an "Aggregate Limit".
• Schedule of Underlying Insurance: This is a crucial part of the declarations. It lists all the primary insurance policies (e.g., Commercial General Liability, Commercial Auto, Employers Liability) that must be in place and maintained for the umbrella policy to respond. It details the underlying insurer, policy number, policy period, and minimum required limits for each.
• Self-Insured Retention (SIR): This is the amount the insured must pay out-of-pocket for a covered loss before the umbrella policy responds, but only if the loss is not covered by any underlying insurance. The SIR does not apply if an underlying policy covers the loss.
• Premium: The cost of the umbrella policy.
• Endorsements: A list of any endorsements attached to the policy that modify its terms.
• Business Description: A description of the named insured's operations.

Essentially, the CU DS 01 customizes the broader terms found in the CU 00 01 to the specific insured and their risk profile. It's the go-to document for understanding the scope and specifics of the umbrella coverage at a glance.

Classes of business it applies to:

Commercial umbrella liability insurance, and therefore the CU DS 01, is relevant for a wide array of businesses across various industries. It's particularly important for businesses with significant liability exposures that could lead to claims exceeding the limits of their primary policies. Examples include:

• Companies with significant public interaction: Retail stores, restaurants, entertainment venues, and healthcare facilities where the risk of third-party bodily injury or property damage is higher. For instance, a customer slipping and falling in a supermarket, resulting in a large medical claim and lawsuit.
• Businesses with vehicle fleets or that rely on transportation: Trucking companies, delivery services, taxi or limousine services, and businesses where employees frequently drive for work purposes. A landscaping company whose employee causes a multi-vehicle accident while driving a company truck, leading to damages exceeding their commercial auto policy limits, would benefit from an umbrella policy.
• Construction and contracting businesses: Due to the inherent risks of construction sites, including potential for significant property damage or bodily injury to third parties or employees of subcontractors.
• Manufacturers and distributors: Companies that produce or sell products that could cause harm or injury, leading to product liability claims.
• Professional service firms: While professional liability (errors & omissions) is often a separate coverage, some umbrella policies may provide excess coverage over certain professional liability policies.
• Businesses with high-value assets or significant revenue: These businesses are often targets for larger lawsuits and need higher liability limits to protect their assets.
• Landlords and property management companies: Responsible for the safety of tenants and visitors on their properties.
• Businesses that handle sensitive patient care or rely on hired and non-owned auto coverage.

Essentially, any business that faces the potential for catastrophic liability claims should consider a commercial umbrella policy.

Special considerations:

• Maintenance of Underlying Insurance: It is crucial that the insured maintains the underlying insurance policies listed in the CU DS 01 with the specified limits. If the underlying coverage is not in force or the limits are lower than required, the umbrella policy will typically respond as if the underlying coverage was properly maintained. This means the insured could be responsible for a significant gap in coverage.
• "Drop-Down" Coverage: Umbrella policies can sometimes "drop down" to provide coverage when the underlying policy doesn't cover a specific loss (subject to the SIR), or when underlying aggregate limits are exhausted. However, the extent of this drop-down coverage can vary significantly between policies and may be restricted by endorsements.
• Follow Form vs. Broader Coverage: While umbrella policies generally "follow form" (meaning they provide coverage consistent with the underlying policies), they can sometimes offer broader coverage than the primary policies (e.g., a wider coverage territory). Conversely, they can also have their own unique exclusions. It's important not to assume the umbrella is always broader.
• Policy Language Clarity: Clear and unambiguous policy language is essential to avoid disputes over the scope of coverage, especially regarding terms, conditions, and exclusions.
• Self-Insured Retention (SIR): The SIR only applies when a loss covered by the umbrella is *not* covered by an underlying policy. It doesn't apply if the underlying policy covers the loss, even if the underlying limits are exhausted.
• Non-Standard Forms: Many insurers use their own proprietary umbrella forms or endorsements rather than relying solely on standard ISO forms. This means policy terms and conditions can vary significantly from one insurer to another, requiring careful review.
• Order of Coverage ("Primary and Noncontributory"): In situations involving additional insureds, there can be complexities regarding which policy responds first. Endorsements like the "Noncontributory—Other Insurance Condition" (e.g., CU 24 78) aim to clarify that the umbrella policy will apply before other insurance available to an additional insured where that additional insured is a named insured on the other policy, provided there's a written agreement.

Key information for agents and underwriters:

• Risk Assessment: Underwriting commercial umbrella policies requires a thorough assessment of the applicant's underlying exposures and the adequacy of their primary coverage. This includes reviewing their loss history (often looking back 10 or more years), operational safety practices, and contractual obligations.
• Pricing: Umbrella premiums are influenced by the limits of insurance, the nature and hazard level of the insured's business, the quality and limits of underlying coverage, and the insured's loss experience. While often one of the less expensive policies relative to the limits provided, it's crucial for catastrophic protection.
• Coverage Gaps: Agents and underwriters must be vigilant in identifying potential gaps between the underlying policies and the umbrella coverage. This includes ensuring that the underlying coverage is as broad as the umbrella expects or, if not, that the client understands any resulting limitations or the umbrella is endorsed accordingly.
• Underlying Insurer Quality: The financial stability and claims-paying ability of the underlying insurers are important considerations, as the umbrella carrier may need to step in to defend claims if underlying limits are exhausted or the underlying carrier becomes insolvent.
• High-Hazard Risks: Certain classes of business are considered high-hazard for umbrella coverage and may require more stringent underwriting or specialized markets. Examples include aviation, professional liability for certain professions, businesses with significant asbestos or pollution exposures, and high-risk construction projects.
• Aggregate Limits: Understanding how the umbrella policy's aggregate limits apply in conjunction with the underlying aggregates is critical. Some umbrellas may have a single aggregate limit for all claims, while others may apply aggregates in the same manner as the underlying policies.
• Contractual Requirements: Businesses often face contractual requirements from clients or partners to carry specific umbrella limits and to provide additional insured status. Agents need to ensure the policy structure, including endorsements, meets these obligations.
• Importance of the CU 00 01: The CU DS 01 is intrinsically linked to the CU 00 01 Commercial Liability Umbrella Coverage Form. The declarations personalize the coverage provided by the form. Understanding the interplay between these two documents is fundamental.