Skip to main content

COMMERCIAL UMBRELLA

For The Excess

Commercial Umbrella Insurance Explained

Commercial Umbrella Insurance is a type of liability coverage designed to provide additional protection beyond the limits of your standard business insurance policies (like general liability, auto liability, or employers’ liability). It acts as a safety net, filling in gaps in coverage and offering extra financial protection if your primary policies’ limits are exceeded. It can be a standalone policy or packaged in with your businessowner’s policy (BOP).

General Coverages

Pursuant to your particular policy language, coverage provisions, and exclusions; commercial umbrella policies can include coverage for:

  • General Liability Coverage – Covers injuries, accidents, and property damage that happen on your business premises or as a result of your operations over and above your underlying general liability policy.
  • Commercial Auto Liability – Covers liability for accidents caused by vehicles owned by your business over and above your underlying commercial auto policy.
  • Reputational Damage – Covers the cost of defending your company from slander or libel claims over and above the limits provided by your general liability policy.

Sometimes commercial umbrella will cover:

  • Employer’s Liability – Extends coverage for claims related to employee injuries (not covered under workers’ compensation) over and above your underlying EPL policy.
  • Liquor Liability – Coverage for businesses that serve alcohol in case a guest gets injured after being served by your business over and above your underlying liquor liability limits.

Commercial umbrella doesn’t generally cover:

  • Professional Errors: Umbrella insurance typically does not cover professional liability (such as errors and omissions), which is usually handled by a separate professional liability insurance policy.
  • Property Damage: Umbrella insurance does not cover damage to your own property or products.
  • Criminal Acts: Any intentional illegal acts or fraudulent activities are not covered by umbrella insurance.

Claims Scenario

A construction company (ABC Construction) is hired to build a shopping center. The company owns several trucks used to transport materials and equipment to and from the site. One afternoon, an employee of ABC Construction is driving a company truck to the job site when they are involved in a serious car accident.

The driver of the ABC Construction truck runs a red light and collides with another car, injuring two people in the other vehicle. The two victims suffer severe injuries, including broken bones and internal injuries, and are taken to the hospital. The at-fault driver is cited by the police, and the accident is deemed to be caused by driver negligence.

How Umbrella Insurance Helps:

ABC Construction’s commercial auto insurance policy covers the accident, but the total liability from the accident exceeds the $500,000 limit of their commercial auto insurance policy.

The injured parties file lawsuits against ABC Construction, seeking $1.2 million in damages for medical costs, lost wages, pain and suffering, and other expenses. The commercial auto insurance covers the first $500,000, but there is still a $700,000 shortfall. Legal defense costs also add up to $100,000, further exceeding the coverage limits of the commercial auto policy.

ABC Construction has a commercial umbrella insurance policy with a $2 million limit. The umbrella insurance kicks in and covers the remaining $700,000 after the auto policy limits are exhausted, paying for the legal fees, additional damages, and settlements. Since the umbrella policy also covers defense costs, it covers the $100,000 legal fees that exceed the coverage of the commercial auto policy.

Contact CastleWise to discuss Commercial Umbrella insurance coverage.