Commercial Umbrella Insurance

In a culture where litigation is commonplace, business owners have so many more worries than making profits and retaining top employees. For instance, if a business’s product injures a consumer, the organization could face a devastating lawsuit, exponential damages and a ruined reputation within the marketplace.

To assist with the financial burden of a claim, many business owners are electing to purchase Commercial Umbrella Insurance on top of their standard Commercial General Liability (CGL) Insurance policies. An aggregate limit is established on most CGL policies that, once exhausted, will not cover any other excess claims.

An easy way to understand how quickly a claim can exceed the first $1,000,000 of coverage is to consider a person that is 35 years old, earning $30,000 a year. If that person is injured and cannot work as a result of your business activities or your employee’s activities the loss of income between 35 and 65 would be $900,000 alone. Not to mention pain, suffering etc... The amount grows to $3-$4,000,000 quickly. A higher wage earner grows even faster.

Although this blog is about commercial umbrella coverage it is important to point out that more family owned businesses are lost because of personal activities such as personal car accidents that because of business liability claims. Your GDI broker can help you coordinate a personal umbrella to cover your personal activities and those of you family members which you are responsible for.

Purpose of Commercial 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:
1. Provides coverage for potential damages and court defense courts that exceed underlying insurance policies (typically CGL policies).

2. 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 policy holder is responsible for losses up to the SIR amount.

3. 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.

Coverage Details
A typical Commercial Umbrella Insurance policy has the following features:

1. Offers coverage for the following: worldwide; personal injury; blanket contractual liability protection; care, custody and control; non-owned aircraft liability; watercraft liability; advertisers liability; liquor law liability and XCU liability.
2. Offers an extension of insurance protection for additional insured’s.
3. Policies are “following form” in which 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 the loss exceeds SIR limits). The damage must also involve personal injury, property damage or advertising injury.
4. The insurer has the right to investigate all claims not covered by any underlying insurance.
5. Policies cover all individuals or 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 insured’s in typically excluded when claims involve motorized vehicles, watercrafts and aircrafts.