What is an Excess Clause? A Comprehensive Legal Overview

Q: Can I have multiple excess clauses in one policy?

Yes, a policy can contain multiple excess clauses, depending on the coverage options selected.

Q: How does an excess clause affect my claim?

An excess clause affects your claim by determining which insurer pays first and how much they are liable for.

Definition & Meaning

An excess clause is a provision found in insurance policies that dictates the insurer's responsibility for a loss. This clause states that the insurer will only cover losses after all other available sources of coverage have been exhausted. Typically located in the "other insurance" section of the policy, the excess clause limits the insurer's liability to amounts that exceed any other coverage that may apply. Essentially, this means that if there are multiple insurance policies in play, the other insurers must pay their share before the excess clause comes into effect.

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Legal Use & context

Excess clauses are commonly used in various types of insurance, including auto, homeowners, and commercial insurance. In legal practice, these clauses help define the order of payment responsibilities among multiple insurers. Users can manage their insurance claims by understanding how excess clauses work, and they may find it beneficial to use legal templates from US Legal Forms to draft or review their insurance policies.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

(hypothetical example) If a person has two insurance policies covering the same property, and a loss occurs, the first policy must pay up to its limit before the excess clause in the second policy applies. For instance, if the first policy covers $50,000 and the loss is $70,000, the second policy will only cover the remaining $20,000.

State-by-state differences

Examples of state differences (not exhaustive):

State	Notes
California	Excess clauses are commonly used in both personal and commercial insurance policies.
New York	State law requires clear disclosure of excess clauses in insurance contracts.
Texas	Excess clauses may be subject to specific regulations regarding consumer protection.

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Difference
Primary Coverage	The first insurance policy that pays for a loss.	Excess clauses come into play only after primary coverage is exhausted.
Pro-rata Clause	A clause that requires insurers to share losses proportionally.	Excess clauses require other insurers to pay first, while pro-rata clauses share costs among insurers.

Common misunderstandings

What to do if this term applies to you

If you find yourself dealing with an excess clause, review your insurance policies carefully to understand your coverage limits and obligations. If necessary, consult with a legal professional for personalized advice. Additionally, consider using US Legal Forms' templates to draft or modify insurance agreements to ensure clarity regarding excess clauses.

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Quick facts

Typical use: Auto, homeowners, and commercial insurance
Key feature: Limits liability to amounts exceeding other coverage
Common misconception: That excess clauses eliminate liability
State variations: Present in some states regarding disclosure and consumer protections

Key takeaways

Frequently asked questions

What is the purpose of an excess clause?

The purpose of an excess clause is to define the order of payment responsibilities among multiple insurance policies.