Vertical exhaustion allows the policyholder to exhaust the primary and lower excess layers within one chosen policy period and then reach that period's higher excess layers, without exhausting primary coverage in other years.
It pairs naturally with all sums allocation.
Alternative Names:
Vertical Exhaustion Rule, Elective Stacking
Why it Matters?
Vertical exhaustion gives policyholders practical access to substantial limits in long-tail claims without the delay of exhausting decades of primary coverage. The California Supreme Court's adoption of the approach in continuous injury cases was a significant development for policyholders in environmental and asbestos matters. Excess carriers argue it defeats their expectation of attaching only after all underlying coverage is consumed.
Frequently Confused with
Related terms
Frequently asked questions
What does vertical exhaustion allow?
Why does it matter in long-tail claims?
