Commercial Umbrella Liability
Umbrella Liability is a broad, flexible, high limit liability coverage designed to supplement your operation’s primary liability protection. The Umbrella policy is designed to accomplish three major functions. The net effect of these is to create an “Umbrella” of blanket catastrophe excess protection.
These three functions are:
1. Excess coverage over other liability insurance carried by the insured, such other liability insurance being referred to as underlying or primary coverage.
2. Coverage of otherwise uninsured exposures. This function is usually referred to as a “drop-down”.
3. Automatic replacement of the aggregate limits in underlying policies, when such limits have been reduced or exhausted through payment of losses.
Once the primary limits are reached in a lawsuit, the courts will order corporate assets to be seized in order to pay for the balance of a claim. This is where the umbrella provides essential protection.
Questions & Answers
Q: Is Umbrella Liability expensive?
A: No, not compared with having to pay the balance of a court award which is above and beyond your primary Auto or General Liability limits. In fact, it may be a less expensive way to purchase additional liability insurance than just increasing your primary policies.
Q: Should I buy Umbrella Liability from the same Insurers which provide my Primary Liability Insurance?
A. Not necessarily. While one insurance company may provide you with the full range of products which you require for your Insurance Program, there are also insurers who specialize in Umbrella Liability, and will write the coverage either in excess of their own policies or as a stand-alone cover. Your choice of insurer should be influenced by the following factors:
- Financial strength and stability
- Experience with similar businesses
- Breadth of coverage: is their offering a true umbrella, or is it just coverage in excess of the primary policies?
- A competitive premium
- Coordination with the balance of your insurance program.
Q: How much coverage should we carry?
A: We can’t tell you how much you would be sued for in a court of law. The highest personal injury case to be settled in Canadian Legal History was reported in 2009 to be $18,400,000. But don’t just focus on how much an individual can sue for: try to imagine your company’s total exposure in any one accident. Also, Product Liability (injury arising out of products which you have manufactured) can present significant multiple exposures to loss arising out of the use of your product.
Q: How do I apply for Umbrella Liability?
A. Ask one of our professional Commercial Brokers about an Umbrella quotation prior to the next renewal of your commercial insurance program. You may be pleasantly surprised at how a properly constructed liability insurance program can provide you with better protection, allowing you to proceed with more confidence that your firm is properly protected against bodily injury and property damage lawsuits.
For more information please contact Geoffrey H. Binks , CAIB, CCIB (Ont.), Vice-President Commercial Division (613) 226-1350