Los Angeles Claims Adjuster Property and Causality Practice Exam

What is it called when liability policies require an underlying coverage to trigger excess liability coverage?

1. Split limits

2. Nonconcurrency

3. Aggregate limit

4. Supplementary payments

The correct answer is: Nonconcurrency

The concept you're referring to is known as nonconcurrency. Nonconcurrency occurs when an excess liability policy is contingent upon the existence of an underlying primary insurance policy. This means that for the excess policy to be activated and provide coverage for claims that exceed the limits of the primary policy, the primary insurance must first respond and provide payment up to its limits. In other words, the underlying coverage must be in place and apply before the excess coverage kicks in. This structure is essential because it creates a layered approach to liability coverage, ensuring that claims are initially addressed by the primary insurer before any excess coverage is utilized. This also maintains clear expectations regarding how claims will be handled between multiple policies. The other terms mentioned do not specifically address this mechanism. For instance, split limits refer to a policy limit structure that separates different types of coverage within the same policy, while aggregate limits define the total amount a policy will pay for all claims during a policy period. Supplementary payments, on the other hand, describe additional benefits provided by a liability policy but do not require underlying coverage. Therefore, nonconcurrency is the correct term to describe the scenario in question.