% Adjusted Loss Excess Exceeding Policy Limit

[benyhui]

If the excess for a policy is for example USD10,000 or 10% of the adjusted loss (whichever is the greater amount) and the limit of liability for the policy is USD100,000.

What happens if there is a claim for USD2,000,000?

As 10% of the adjusted loss would be USD200,000, (since this provides the greater amount). Would the insurance company have to pay nothing as this excess already exceeds the policy limit of USD100,000.

Or is there an implied term that the 10% of the adjusted loss is subject to the policy limit of USD100,000, and so the insurance company would have to pay USD90,000 over the excess of USD10,000.

Or is there another alternative?

Any actual case illustrations would be much appreciated!

 

[djs]

My brain might be asleep, but I don't understand the context of your question.

Are you talking about loss adjustment expense?

Dan

 

[benyhui]

The "adjusted loss" is equivalent to the amount claimed to my understanding.

In my example, to simply put it, the insurance policy states the excess payable by the insured to be 10,000 or 10% of the amount claimed by the insured (i.e. the insured has to pay up this initial amount of the claim before he can claim the remainder from the insurer)

My question is if the claim is for example 2,000,000, the excess that is required to be paid by the insured is already 200,000 (as the 10% option is greater) and this already exceeds the policy limit of 100,000. So can the insured claim back anything at all?

Hope this helps!

 

[hesse]

Are you talking about an umbrella/excess policy and the self insured retention?