We live and do business today in a litigious society. You may think your biggest business worries are making profits and keeping great employees. Consider the possibility, however, that a customer is injured by one of your products. What could happen? A devastating lawsuit with exponential damages and a ruined reputation. While it’s difficult to protect against a ruined reputation, commercial umbrella insurance purchased in addition to your standard commercial general liability (CGL) policies can help protect you from the expenses of a lawsuit.
Most CGL policies have an aggregate or total limit that, once exhausted, will not cover any other claims. Experienced business professionals understand that the litigious nature of our society combined with high liability judgments are reason enough to purchase additional coverage.
Over the years, courts have reached multimillion-dollar verdicts in the following cases: a grain elevator explosion in which an individual suffered severe burns in Ohio; the use of a chemical inaccurately labeled as animal feed in which thousands of livestock died in Michigan; and a commercial truck accident in Florida in which many people lost their lives.
Businesses are also liable for the health and safety of their employees and for their employees’ behavior. For instance, 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 a number of employees to become ill. To protect against an unforeseen claim similar to these, you need to consider an umbrella policy.
Purpose of Umbrella Insurance Coverage
Umbrella insurance coverage is designed to protect an organization against monumental liability claims that can demolish a business through a large financial judgment. Typically, Umbrella coverage is designed to give you an extra layer of security; business umbrella liability insurance provides supplemental coverage for costs associated with lawsuits, legal fees and settlements.
Additionally, business umbrella liability insurance can cover bodily injury and personal property claims that are not covered by your other liability policies (such as property, auto and workers compensation).
Umbrella insurance coverage applies to claims where the aggregate or total 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.
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 (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 in typically excluded when claims involve motorized vehicles, watercrafts and aircrafts.
Beyond these stipulations, a commercial umbrella policy requires that your company must hold an underlying insurance policy during the term of the policy. To learn more about protecting your business with commercial umbrella insurance, call Roper Insurance & Financial Services today at (303) 721-1145.