Meet OLLE, the Occurrence Limit of Liability endorsement
Undoubtedly, you’re familiar with many ways that insurers seek to limit their exposures to loss. But how well do you know OLLE?
Sometimes referred to as a Scheduled Limit of Liability Endorsement, an Occurrence Limit of Liability Endorsement (OLLE) has become commonplace on property insurance policies. The endorsement clarifies the amount of insurance that is available in any one occurrence for each location or for each subject of insurance (i.e. buildings, contents, inventory, business income, etc.). Oftentimes, in addition to defining their maximum loss potential, underwriters will impose this endorsement as a reaction to their perceived under-valuation of reported assets.
If a policy contains this endorsement, it is considered a “scheduled policy” rather than a blanket policy. In the case of property insurance, a blanket policy would allocate a maximum limit of liability which is typically based on the declared value of the total asset schedule (even inclusive of time element exposure). This maximum limit would be available for any occurrence, subject to the policy’s coverage sublimits and valuation clauses, regardless of the number of locations or subjects of insurance involved.
Instead, an OLLE limits the insurers’ liability to 100 percent of the total value of each individual location or 100 percent of each location’s individual subject of insurance – depending on the language of the endorsement – as declared on the Statement of Values presented and on file with the underwriter.
In some cases, underwriters may further provide, as a maximum limit of liability per location, an additional 10 to 20 percent “margin” over those values on file for each location. This is also called a margin clause (in some cases the term “Margin Clause” can be used to refer to the OLLE in general, such as with Lloyd’s of London).
Underwriters will typically allow for this margin flexibility when they feel comfortable the values represent the approximate replacement cost of the assets. It can provide the insured a cushion in the event of unknowingly under reporting their values. However, to better assure that enough coverage be available to make the insured whole when a loss occurs, definitive appraisals are recommended when there is doubt of the accuracy of insured values.
Sound a bit confusing? It can be. Endorsements vary from insurance company to insurance company. That’s why brokers must carefully evaluate each endorsement and review it with the insured so there are no surprises in the event of a major claim.
Photo credit: Marc Roberts / Foter / Creative Commons Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0)
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