Runoff insurance, also known as excess liability insurance, is a type of liability insurance that provides coverage for losses that occur after a policy’s primary liability limits have been exhausted. It typically applies to claims arising from a business’s operations or products that continue to cause harm after the policy has ended.

Key Features of Runoff Insurance:

• Additional Liability Coverage: Covers additional liability beyond the primary policy limits.
• Claims Made After Policy Termination: Provides coverage for claims made after the policy termination date.
• Runoff Exposure: Covers losses arising from liabilities that existed during the policy period but are discovered later.
• Specific Coverages: Can include coverage for specific risks, such as product liability or pollution.
• Claims Handling: May include services such as claims handling and defense.

Typical Scenarios:

• A business owner has a liability policy with a limit of $1 million. However, a product liability claim brought against the business results in a settlement of $1.5 million. The runoff insurance policy would cover the additional $500,000.
• A manufacturer’s product causes injuries after the policy has expired. The manufacturer may have runoff insurance to cover any claims arising from the injuries.

Cost:

The cost of runoff insurance varies depending on factors such as the business’s size, industry, and risk profile. It can be a significant additional premium, especially for businesses with high liability exposure.

Additional Considerations:

• Retroactive Coverage: Some runoff policies offer retroactive coverage, which provides coverage for claims that occur during the policy period, even if the claims are made after the policy termination.
• Deductible: Deductibles apply to the amount of coverage provided by runoff insurance.
• Exclusions: Certain risks may be excluded from coverage, such as intentional torts or asbestos-related claims.

Conclusion:

Runoff insurance can provide valuable additional liability coverage for businesses that have high liability exposure or need protection against potential claims that may arise after the policy termination date. It is an important consideration for businesses with high risk profiles.