Suppose one of your clients is an arborist, who works with dangerous equipment – and in hazardous conditions – regularly. Or you’re working with the owner of a large concert venue who is worried about the risks of hosting large events with huge crowds. In cases like these, insurance carriers may refuse to offer standard coverage due to the higher risks associated with their businesses. Additionally, business owners might be considered “higher risk” to insure due to lack of professional experience, a history of claims, or a criminal past.
In these cases, Excess & Surplus lines (E&S) – a specialty marketplace that insures businesses that standard carriers won’t cover – may be the answer.
What’s the difference between standard vs. excess or surplus lines insurance?
With standard insurance companies (also known as admitted insurers), the state department of insurance (DOI) reviews and regulates each company’s insurance forms, rates, and financial standing. Since standard insurers are carefully regulated by their state’s insurance commissioners, they have less flexibility in the types of risks they can cover.
In contrast, E&S insurance companies (also known as non-admitted insurers) are licensed to do business, but they do not have to file their rates with each state. This allows E&S insurers to cover a greater amount of risk. Unlike standard insurance, surplus lines policies can manuscript their own endorsements and tailor their policies to meet the unique needs of each policyholder.
Who needs E&S Insurance?
E&S carriers specialize in difficult or high-risk exposures. Clients who may need this type of coverage could include businesses in the construction industry (e.g., general contractors, roofers), landscaping (e.g., arborists), oil & energy (e.g., businesses that conduct underwater drilling), event venues, and many more. While these clients span multiple industries, their commonality is that they face risks that are too high to insure via the standard market.
Opting for E&S insurance may be the best (or only) option for many high-risk businesses, providing the right amount of protection for bodily injury, property damage, or other losses.
Common E&S Commercial General Liability classes include:
Apartment Buildings. Apartment owners face an increased probability of losses due to high foot traffic and occupancy. More units mean more people are onsite at any given time, increasing the likelihood of slip & falls, fires, water damage, and other accidents and incidents. Be certain that apartment building owners are covered against property damage and bodily injuries that occur on-premises.
Property Owners. Some property owners may face higher risks due to their location in a hurricane, flood, or wildfire-prone geography. Risks are higher on the coasts and in places like Colorado, which has experienced high occurrences of damaging wildfires recently. Consider, for instance, the Property Insurance market in Florida – which has faced not only frequent hurricanes but also the recent Surfside condo collapse. More frequent, intense weather events have elevated property risks in certain locations.
Special Events. Special events come with inherent risks that can lead to bodily injury, property damage, and even death. In 2017, 58 people were killed and more than 850 were injured at the Route 91 Harvest country music festival in Las Vegas after a gunman opened fire during a Jason Aldean performance. And Travis Scott’s 2021 Astroworld Festival left nine attendees dead and many more injured after a crowd rushed the stage. Unfortunately, when large crowds gather, there can be unforeseen incidents that cause injuries, or in these cases, mass casualties. E&S insurance protects individuals and businesses from liability if an incident occurs. This type of insurance can also protect the venue and event sponsors if they’re included in the policy. Advise clients in the special events space to purchase enough coverage to protect them from a variety of scenarios, including guest injuries, damaged property, or event cancellations due to unforeseen circumstances.
Vacant Properties. Vacant properties are at increased risk for water, wind, or fire damage, vandalism, theft, and other losses. As a result, property owners may need additional coverage beyond a standard insurance policy – such as vacant general liability insurance. As the name suggests, this type of policy protects businesses against losses incurred while the building is vacant. When determining whether your client needs this type of policy, consider the length of vacancy, reason for vacancy, risk exposures, property location, and more.
Contractors. Be sure your contractor (and other construction) clients are properly protected against bodily injury claims and property damage resulting from their work. These policies can help with legal, medical, and settlement costs if there are injuries or property damage during construction.
Lessor’s Risk Only. Lessor’s Risk Only (LRO) is small business insurance for commercial landlords. It protects the premises owner when leasing space to commercial tenants, covering losses resulting from the tenant’s use of the property. LRO covers a variety of bodily injury and/or property damage losses that occur at the leased location, including:
- Theft and vandalism
- Slip and fall injuries
- Weather damage
- Water-related damage
- Auto accidents on the property
Why is E&S coverage essential now?
Many factors are contributing to the “hardening” of the current insurance market, including the COVID-19 pandemic, the rise of extreme weather events, increased cybersecurity crimes, more frequent litigation, etc. The insurance industry is facing a perfect storm of rising rates, shrinking capacity, and stricter underwriting requirements. Thus, agents must work harder to find insurance coverage that meets their clients’ needs. Often, an Excess and Surplus policies are the right answer for higher-risk businesses and situations, providing the necessary coverage and protection for your clients.
Make sure your high-risk clients are properly protected. The Quaker team has extensive insurance experience and can identify the best Excess and Surplus coverage to meet your client’s specific needs. Contact us to learn more.