A tower of limits is a stack of liability policies that together provide one large limit. The bottom layer, the primary policy, responds first. Excess or umbrella policies sit above it and respond only after the layer below has paid its full limit. A contractor with a $1 million primary and four excess layers of $5 million each has, on paper, a $21 million program.
The phrase “on paper” matters. We review towers for a living, and the most common problem we find is not a missing policy. It is a floor that does not connect to the one beneath it.
How the floors are supposed to connect
Each excess layer is meant to sit directly on the layer below and pay when that layer is exhausted. For that to work, the excess policy has to accept the underlying limit as the attachment point, and the underlying policy has to pay in the way the excess policy expects. In a clean tower, every layer uses similar wording, the same policy period and the same definition of a covered loss.
In a tower assembled over several renewals, that is rarely the case. One year the primary carrier changes. The next year a new excess layer is added because the contract requires a higher limit. Each decision is reasonable on its own. Together they can leave a program where layer three quietly excludes something layer two covers.
Three places a floor goes missing
- Attachment mismatch. The excess policy says it attaches above a $1 million primary, but the primary limit was reduced or eroded by defense costs. Depending on the wording, the excess carrier may not drop down to fill the difference.
- Exclusions that do not line up. A pollution or professional services exclusion on a middle layer can cut off everything above it, even when the primary responds.
- Coverage that stops at the primary. Some endorsements, such as additional insured status or a waiver of subrogation, apply to the primary policy only. Your contract may need them to flow through every layer.
A quick test: ask your broker for a one-page schedule showing each layer, its carrier, its limit, its attachment point and any exclusion not found in the layer below. If nobody can produce it, the tower has probably never been read as a whole.
Why limits alone do not answer the question
When a client asks how much liability cover they need, the first instinct is to point at the biggest contract or the biggest asset. Those are useful inputs, but they are not the whole answer. The realistic worst case depends on how many people or properties a single event can touch, how long a claim can take to resolve and what a jury in your operating area might award. None of that produces a single tidy number.
What we can do is build the tower from the exposure up. We list the events that could plausibly happen, estimate a range of outcomes for each and choose limits that cover the credible severe case, then test whether the market will sell that capacity at a price the client can carry. Sometimes the market will not, and then the conversation turns to which exposures to retain, transfer by contract or avoid.
Reading your own tower
You do not need to be an underwriter to check the basics. Start with your policy declarations for each layer and look for these items.
- The policy period. Layers on different renewal dates are a warning sign, because coverage triggers can differ.
- The attachment point. It should equal the limit of the layer directly below, with no gap.
- The form type. Follow-form excess wording mirrors the policy below it, while a stand-alone form can restrict cover in its own way.
- The named insureds. Every entity on the primary should appear on every layer above it.
If two layers disagree on any of those, ask why. There may be a good reason, such as a subsidiary that only needs the lower layers. There may also be no reason at all beyond how the program grew.
When a floor is missing on purpose
Not every gap is a mistake. Some programs deliberately leave out cover that costs more than the risk justifies, or that the market will not offer on reasonable terms. Our concern is with gaps nobody chose. A retained exposure that your finance team has priced and accepted is a strategy. The same exposure discovered after a loss is a claim dispute.
That is why we walk clients through the tower layer by layer, in writing, at every renewal. It takes about an hour and it is the cheapest risk control most companies never buy.
If you would like your program read as a single structure, send us the declarations pages and we will mark up where each floor connects, where it does not and what it would take to close the gaps.