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Category: Business Law
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Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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I am suing a hotel that has an insurance policy for Employment

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I am suing a hotel that has an insurance policy for Employment Practices Liability Insurance. Through Discovery, I have a copy of the policy. It says that the Limit of Liability (Inclusive of Costs of Defense) are $4,000,000 excess of $1,000,000. What does this mean?

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I have to give you an example to explain the policy.



Policy Limits:
Policy Type Aggregate Limit Defense Costs Covered
Primary (underlying) $1,000,000 In Addition
Excess Liability $4,000,000 Within Limits


Assuming First Loss:


Indemnity: $1,000,000 (the payout to the plaintiff)

Defense Costs: $ 200,000
Total Loss: $1,200,000


Primary Policy Pays: $1,200,000 total

The primary policy limits are now exhausted.



Assuming Second Loss:

Indemnity: $3,500,000
Defense Costs: $1,500,000
Total Loss: $5,000,000

Excess Policy Pays: $4,000,000 total
(including $3,500,000 for indemnity
and $500,000 for defense costs)


The Excess Liability policy limits are now exhausted
and the insured is short $1,000,000 in coverage.




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