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 insurance policies.
Commercial umbrella insurance is designed to supplement existing insurance policies, giving you an additional layer of protection for your business. We’ll work with you to find the right umbrella solution.
A commercial umbrella policy kicks in only if your main business insurance policy reaches the payout limit. At that time, the commercial umbrella policy would pay out the remaining costs. Once the limit is reached, there will be no more coverage for excess claims. Experienced business professionals understand that the litigious nature of our society combined with surmounting liability judgments can be a good reason to purchase additional coverage. Lawsuits have the potential to impose multimillion-dollar penalties on businesses, which is far outside the coverage provided by most commercial general liability policies. As a result, common losses such as vehicle accidents, employment claims and hazardous substance spills can pose a serious financial threat.
Businesses are also liable for the health and safety of their employees and for their employees’ behavior. For example, your business could be held liable after your holiday party results in property damage to a rented banquet hall. You may also face litigation if your business office has a carbon monoxide leak that causes several employees to get extremely ill. To protect against an unforeseen claim like these, commercial umbrella insurance protection could be beneficial.
Purpose of Umbrella Coverage
Umbrella coverage is designed to protect an organization against monumental liability claims that can demolish a business through a large financial judgment. Typically, an umbrella policy serves the following purposes:
- Provides coverage for potential damages and court defense fees that exceed underlying insurance policies, typically CGL policies.
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.
- In another example, let’s say you have a liability insurance policy of $500,000 for your business, but you must pay damages of $700,000. If you have a commercial umbrella policy in place for your business, the liability insurance policy will pay out in full first, and then the umbrella policy will pick up the remaining $200,000.
Provides coverage in situations not covered by underlying insurance policies but not excluded from the umbrella policy. This benefit is subject to self-insured retention. This is like a deductible, in which the policy holder is responsible for losses up to the subject to self-insured retention amount.
Coverage Details
A typical umbrella policy has the following features:
- 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 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. 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, and stockholders acting on behalf of the organization. The beauty of umbrella insurance is that because there’s a relatively low chance it will need to pay out, it’s often considerably less expensive to purchase than you might expect.
Umbrella liability insurance provides an extra layer of protection over your personal assets for when your standard liability coverage is exhausted. Beyond these stipulations, a commercial umbrella policy ascertains that an organization must hold an underlying insurance policy during its term. To learn more about averting your business risks with commercial umbrella insurance, contact Dempsey and Siders today.