Under horizontal exhaustion, an excess insurer's obligation attaches only after every primary policy covering the loss, across all triggered periods, has been exhausted.
It contrasts with vertical exhaustion, which permits access to excess layers once the primary in a single selected year is exhausted.
Alternative Names:
Horizontal Exhaustion Rule
Why it Matters?
This rule delays excess participation substantially in long-tail claims, since exhausting primary coverage across decades of policy periods can take years. Excess carriers accordingly favor it, and policyholders favor vertical exhaustion. The choice interacts with the allocation method, since all sums jurisdictions increasingly pair it with vertical exhaustion to give the insured meaningful access to a single year's tower.
Frequently Confused with
Related terms
Frequently asked questions
What does horizontal exhaustion require?
Why do policyholders prefer vertical exhaustion?
