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Posts|March 16, 2021

The Basics, Part 3: Umbrella Liability

By Preston Cavignac
Principal CPCU, CIC, CRM

In this series we look at specific insurance policies and concisely explain how they work.

Umbrella Liability

Who does it protect?

  • Just like the General Liability (GL) policy, the Umbrella policy or Excess (XS) Liability policy covers your company, its owners and employees and volunteer workers (while performing duties related to the conduct of your business).

What coverages does it offer?

  • Excess Liability policies generally “follow form” of the underlying policies. This means they have substantially the same terms and conditions of those policies. Umbrella policies could potentially include more coverage (they don’t always follow form, and at times extend more coverage subject to a self-insured retention). But for all intents and purposes, Umbrella or Excess Liability policies provide an additional limit over your General Liability and Auto policies.

Who could bring a claim?

  • Anyone outside your company, its employees, etc. could technically bring a claim. Think of Umbrella as an extension of your General Liability and Auto policies. It simply provides higher limits.

When should you submit a claim?

  • As mentioned above, many Umbrella/XS policies follow form. This means that you must follow the terms and conditions of the underlying policy. From a General Liability perspective, this generally means “as soon as practicable.” From an Auto policy perspective, when the accident occurs.

What are some claims examples?

  • Auto – Your driver accidentally gets into an auto accident. The Auto policy has a limit of $1MM, however the claimant’s medical bills plus indemnity came out to $1.5MM. The XS policy would indemnity you for the excess amount over $1MM.
  • General Liability – A patron was walking through your Museum when they missed a step and fell down stairs. The Museum has a General Liability policy with a $1MM per occurrence limit. The claimant’s medical bills plus indemnity came out to $2MM. The XS policy would pick up the amount over $1MM.

Any specifics to be aware of?

  • As mentioned above, an Umbrella policy may offer more coverage than your underlying General Liability policy (or less). A true Excess Liability policy will “follow form” subject to a select few endorsements. There are generally fewer forms and endorsements on these policies, but it is always important to review them thoroughly.

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