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Insurance & Bondingaka: excess coverageaka: follow-form excess

Excess Liability

In Plain English

Extra insurance that kicks in after your main policy's limit is used up.

Definition

Excess liability insurance provides additional coverage above the limits of a specified underlying policy once those limits are exhausted. Unlike an umbrella policy, excess liability follows the exact terms and conditions of the underlying policy and does not fill gaps in coverage. On large construction projects, owners may contractually require contractors to carry excess liability limits of $5 million or more above their primary CGL coverage.

Why It Matters in Bidding

Excess liability is a common bid-qualification requirement on large projects where owners demand combined limits well above a contractor's primary CGL. Because it follows the underlying policy's terms rather than broadening them, an estimator confirming compliance must verify both the limit and that the excess sits over the right schedule of underlying coverage, or the certificate fails owner review.

Example

Bidding a $40 million hospital, a GC's risk manager stacks a $10 million excess liability policy over its $2 million primary CGL to meet the owner's $12 million combined-limit requirement before issuing the certificate of insurance with the bid.

Related Terms

Umbrella PolicyCommercial General Liability (CGL)Per Occurrence Limit

Frequently Asked Questions

Both add limits above a primary policy, but an umbrella can also broaden coverage and drop down to fill gaps the primary excludes. Excess liability strictly follows the underlying policy's terms and only adds limit after the underlying is exhausted, so it never covers something the primary would deny.
Large or high-occupancy projects carry catastrophic loss potential that can exceed a typical primary CGL limit. Owners contractually require excess limits, often several million dollars, to ensure adequate funds are available for a major claim and to push that exposure onto the contractor's insurance program rather than their own.
The premium for the required excess limit is a general-conditions or markup cost the estimator must carry. Equally important, the contractor must confirm it can actually obtain the mandated combined limit before bidding, since failing to produce a compliant certificate after award can jeopardize the contract.

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