Vertical exhaustion rule

Term · Insurance and risk management · MLC-T-INS-003478

A rule for allocating a long-tail loss across several policy years under which an insured can reach an excess policy of a given year once the primary and other underlying layers of that same year are exhausted, without first exhausting every primary policy in all other triggered years. It contrasts with horizontal exhaustion, which requires all primary policies across the triggered years to be exhausted before any excess policy responds. Courts in different states have adopted each approach, and the outcome often turns on the excess policy language.

Table 1. Record
Identifier	MLC-T-INS-003478
Field	Insurance and risk management
Subject	Excess Umbrella

Record as JSON

{
  "id": "MLC-T-INS-003478",
  "term": "Vertical exhaustion rule",
  "field": "Insurance and risk management",
  "definition": "A rule for allocating a long-tail loss across several policy years under which an insured can reach an excess policy of a given year once the primary and other underlying layers of that same year are exhausted, without first exhausting every primary policy in all other triggered years. It contrasts with horizontal exhaustion, which requires all primary policies across the triggered years to be exhausted before any excess policy responds. Courts in different states have adopted each approach, and the outcome often turns on the excess policy language.",
  "subject": "Excess Umbrella",
  "url": "https://mlchart.com/terminology/insurance/vertical-exhaustion-rule/"
}

Record 3,558 of 3,682 in Insurance and risk management terminology (MLC-0106). Request the full dataset.