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Endorsements/policy anti-stacking provisions are meant to avoid the application of multiple sets of policy limits, deductibles, or retentions to a single loss. Each provision/endorsement is different and the specific policy language must always be consulted. These provisions are becoming more prevalent with the market hardening as well as the ability of losses to potentially tap into multiple policies (and by consequence those limit structures and aggregates). The provisions typically stipulate that, in the event of a loss under multiple policies, only one policy limit and/or retention/deductible, will apply. The most common types of anti-stacking provisions are horizontal stacking and vertical stacking.
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What Is Horizontal Stacking?
This type of provision states that the policy limit will not be increased by the number of policies or insureds involved in the loss. So, if there is a loss under two policies each with a $1M limit, the most the insurer will pay is $1M.
What Is Vertical Stacking?
This type of provision states that the policy limit will not be increased by the number of occurrences involved in the loss. So, if there is a loss under two policies each with a $1M limit and the loss consists of two occurrences, the most the insurer will pay is $1M. While anti-stacking provisions can be useful in certain situations, they may also have some unintended consequences. For example, Law Insider explains that if there is a large loss that involves multiple insurers and policies with different limits and retentions/deductibles, it may still be necessary to apply those limits to reach the total amount of damages. Additionally, in some cases, it may be difficult to determine whether a loss is one occurrence or multiple occurrences.
Overall, it is important to carefully review any anti-stacking provisions that apply to your policies and understand how they will impact you in the event of a loss. To ensure that you are fully protected, it may be necessary to purchase additional insurance or negotiate different policy terms.
Examples of Anti-Stacking Provisions that Could Apply to a Loss
Given the above definition of anti-stacking provisions/endorsements, let’s take a look at how these might practically apply to losses.
1. One policy limit will apply per loss, regardless of the number of policies or insureds involved.
2. One policy limit will apply per occurrence, regardless of the number of policies or insureds involved.
3. Only one deductible will apply per loss, regardless of the number of policies or insureds involved.
4. Only one retention will apply per loss, regardless of the number of policies or insureds involved.
5. The policy limit will not be increased by the number of policies or insureds involved in the loss.
6. The policy limit will not be increased by the number of occurrences involved in the loss.
7. In the event of a loss under multiple policies, only one policy limit will apply.
8. In the event of a loss under multiple policies, only one deductible will apply.
9. In the event of a loss under multiple policies, only one retention will apply.
10. Multiple policy limits will not be combined to increase the total amount of coverage available.
Overview: Anti-Stacking Provisions
Endorsements will likely be included in any policy you have, whether you have startup insurance or small business insurance, or coverage for something very specific like Tech E&O for your software company. If you’re looking for additional resources beyond these, check out some of these top articles for your company:
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