What is defined as a policy providing primary liability insurance covering listed types of liability?

A policy providing primary liability insurance that covers listed types of liability is referred to as underlying insurance. This type of insurance forms the foundational layer of coverage in a liability insurance structure, particularly in situations where other policies may come into play, such as excess or umbrella insurance. Underlying insurance specifically addresses the different types of liabilities that an insured party may face, ensuring that those risks are adequately covered during the initial levels of liability.

In this context, underlying insurance is critical as it provides immediate protection and is the first line of defense against claims. If a claim exceeds the limits of the underlying coverage, then additional layers of coverage, such as excess or umbrella policies, may respond, but that secondary coverage is only effective if there is adequate underlying insurance in place.

It’s important to distinguish this from other terms such as social inflation, which refers to the increasing costs associated with claims and litigation pressures. Vicarious liability involves a legal doctrine where one party can be held liable for the negligent actions of another, while self-insured retention is a specific amount an insured must pay before the insurance coverage kicks in, not a primary liability insurance itself. Therefore, the definition that captures the essence of a policy offering direct coverage for specific liabilities aligns perfectly with the concept of underlying