Short answer
An umbrella policy sits over your general liability, auto, and employers liability, adds limits when those are used up, and can also cover some claims they do not, subject to a self-insured retention. An excess liability policy only adds limits on top of an underlying policy and is no broader than it. MSAs often accept "umbrella or excess" to meet a limit requirement, but the two do not always deliver the same coverage to the operator.
- A "follow form" excess policy follows the underlying terms except where it says otherwise, and those exceptions matter.
- Additional insured status, primary and non-contributory wording, and waiver of subrogation have to work at the umbrella and excess level too, not just on the GL.
The short difference
IRMI describes an umbrella as a policy "designed to provide protection against catastrophic losses," usually written over several primary policies such as auto, general liability, and employers liability. It does three jobs: it adds limits when the underlying limits are exhausted, it drops down when an underlying aggregate is used up, and it can cover some claims the underlying policies do not, subject to a self-insured retention.
An excess policy is narrower. IRMI defines it as "a policy issued to provide limits in excess of an underlying liability policy," which "is no broader than the underlying liability policy." Its purpose is additional limits.
| Umbrella | Excess | |
|---|---|---|
| Sits over | Usually GL, auto, and employers liability together | An underlying policy, often an umbrella |
| Broader than the underlying? | Can be, for some claims, subject to a self-insured retention | No |
| Drops down when an underlying aggregate is exhausted | Yes, per IRMI’s description | Not its job; IRMI says its sole purpose is additional limits |
| Own terms and exclusions | Often has its own insuring agreement, definitions, and exclusions | Follow form, except where it says it does not |
How MSAs use umbrella and excess limits
Operator limits often run higher than one primary policy carries, so the umbrella or excess layer is usually what closes the difference. Two things to watch:
- What sits underneath. If the MSA requires higher limits on auto and employers liability as well as GL, the umbrella's schedule of underlying insurance has to list all three.
- What the MSA says about the layer. Some MSAs say the umbrella must follow form over each required policy, or must cover the operator as an additional insured. That is a coverage requirement, not just a limit.
For typical limits and how they are stacked, see what limits operators require and our oilfield umbrella insurance page.
Follow form is not a guarantee
IRMI defines a follow form excess policy as one "subject to all of the terms and conditions of the policy beneath it," with the underlying terms controlling if they conflict. But IRMI also notes that many excess policies say they follow form while excluding certain terms, and that umbrellas can be stand-alone policies with their own insuring agreements, definitions, conditions, and exclusions.
For oilfield contractors, that means an endorsement you paid for on the GL, like underground resources and equipment coverage or a pollution give-back, does not automatically carry into the umbrella. Ask whether it does, and get the answer from the umbrella form itself.
Where the operator can get left out
IRMI commentary on additional insured coverage under excess policies makes three points that line up with MSA requirements:
- Additional insured status is not automatic. A follow form excess policy "follows form except where it does not follow form," and some excess policies have no follow form language at all. Then the operator's status depends on the excess policy's own Who Is an Insured section.
- Primary and non-contributory. The excess policy's other insurance clause is usually excess over other valid insurance, which can put it behind the operator's own primary policy unless it is endorsed. See primary and non-contributory.
- Waiver of subrogation. The excess policy's transfer of rights clause can defeat a waiver in favor of the additional insured unless it is endorsed. See waiver of subrogation.
The certificate shows the limit, not the wording
A certificate can show an umbrella limit that matches the MSA while the umbrella form does not deliver additional insured, primary, or waiver wording. If the MSA asks for those at every layer, check every layer.
Common questions
Can I use an excess policy instead of an umbrella to meet my MSA?
Often the MSA says "umbrella or excess," and either can meet the limit. The question is whether the excess policy delivers the same additional insured, primary, and waiver terms the MSA requires at that layer.
Does my umbrella cover the operator automatically?
Not automatically. It depends on whether the umbrella extends insured status to additional insureds on the underlying policies and on what limits it gives them.
What is a self-insured retention on an umbrella?
It is the amount you pay yourself on a claim the umbrella covers but the underlying policies do not. IRMI notes the umbrella’s broader coverage is subject to it.
Should employers liability be scheduled under my umbrella?
If the MSA requires employers liability limits above your primary limit, yes. IRMI notes umbrellas are generally written over employers liability along with auto and general liability.
Sources
- IRMI glossary: umbrella liability (UL) policy. Catastrophic loss protection, three functions, self-insured retention.
- IRMI glossary: excess liability policy. Excess limits only, no broader than the underlying policy.
- IRMI glossary: excess liability "follow form" policy. Follow form definition and partial follow form policies.
- IRMI: Additional Insured Coverage under Excess Policies (June 2017). Additional insured status, other insurance, and transfer of rights at the excess level.
- IRMI glossary: follow form. Umbrella policies may be stand-alone, subject to their own terms.
This page explains insurance, not law. Have your attorney review indemnity and contract language; our job is making the insurance match it.
Keep reading
Coverage
How much umbrella do operators want, and why does my certificate keep failing on it?
Questions
What insurance limits do oil and gas operators require from contractors?
Questions
Why does my operator want primary and non-contributory?
Questions
What is a waiver of subrogation, and why does every oilfield MSA ask for one?
Contract requirements
The operator sent me an MSA. What insurance does it actually require?