Providing peace of mind.
In a culture where litigation is commonplace, business owners have many more worries than making profits and retaining top employees. If your product injures a consumer, your organization could face a devastating lawsuit, exponential damages, and a tainted reputation in the marketplace. To assist with the financial burden of a claim, many business owners purchase commercial umbrella insurance on top of their standard commercial general liability (CGL) insurance policies.
Most CGL policies have an aggregate limit that, once exhausted, will not cover any other excess claims. Experienced business professionals understand that the litigious nature of our society combined with surmounting liability judgments are reason enough to purchase additional coverage.
What is the purpose of umbrella coverage?
- Provides coverage for potential damages and court defense fees that exceed underlying insurance policies (typically CGL policies).
- Provides coverage in situations that are not covered by underlying insurance policies but are not excluded from the umbrella policy. This benefit is subject to a self‐insured retention (SIR), similar to a deductible, in which the policyholder is responsible for losses up to the SIR amount.
- Applies to claims where the aggregate limit of the underlying policy has been met. The umbrella policy will cover the portion of the claim that cannot be paid with the underlying policy because there are not enough funds available in the policy to cover the entire claim. For instance, if at the time of a claim your CGL policy has $500,000 remaining and the claim in question is $1.5 million, then the CGL policy will cover $500,000 and then the umbrella policy will cover the remaining $1 million.
Umbrella coverage details.
- Offers coverage for worldwide; personal injury; blanket contractual liability protection; care, custody, and control; non‐owned aircraft liability; watercraft liability; advertisers liability; liquor law liability; and explosion, collapse, and underground (XCU) liability.
- Offers an extension of insurance protection for additional insureds.
- Policies follow form, meaning they abide by similar provisions and cover similar losses as the underlying policy. If claims are not covered by an underlying policy, the umbrella policy makes the business responsible for the loss if it exceeds SIR limits. The damage must also involve personal injury, property damage or advertising injury.
- The insurer has the right to investigate all claims not covered by any underlying insurance.
- Policies either cover all individuals or cover parties that gain insured status within the contract.
- Policies also protect an organization’s executive officers, regular employees, directors and stockholders acting on behalf of the organization. Protection for additional insureds is typically excluded when claims involve motorized vehicles, watercraft, and aircraft.
- Beyond these stipulations, a commercial umbrella policy ascertains that an organization must hold an underlying insurance policy during the term of the policy.