What Does a Typical Commercial Umbrella Liability Insurance Policy Cover?


Purchasing business insurance is one of the first considerations owners make when deciding to start a new venture. A business will require several different insurance policies in order to manage risk effectively. The nature of your business venture will determine the types of policies your business requires to mitigate risk. Choosing the right type of business insurance can be an overwhelming task, especially for first time business owners. Commercial umbrella liability insurance is one of the most important policies that a business can buy. It provides additional liability protection by covering costs that go over the liability coverage limits of your primary liability policies.  But, what does commercial umbrella liability insurance cover exactly?

What is Included in a Commercial Liability Insurance Policy?
The main purpose of an umbrella insurance policy is to protect against catastrophic losses by providing liability coverage that goes beyond the scope of the insured’s primary liability policy. The umbrella policy provides additional limits when the limits of underlying liability policies are exhausted by the payment of claims and is designed to kick in when the liability on these other policies have been exhausted.

Like commercial liability insurance, umbrella policies are not designed to cover any damage to the insured’s own person or property, but instead covers claims made against the insured by other parties who have suffered loss or damage as a result of some event for which the insured is responsible.  A typical policy will pay for attorney fees, witness fees, settlements, and any court-ordered judgments, so long as the loss or damage falls within three specifically defined categories:

(1) Property Damage,
(2) Bodily Harm,
(3) Personal Injury.

Personal injuries are distinguishable from bodily injuries in that they are limited to an enumerated list of offences which do not involve direct physical harm, but instead involve intangible injuries. Some of these offences include libel, slander, malicious prosecution, and false imprisonment. Umbrella policies may also provide coverage for claims that may be excluded under the insured’s primary liability policies.

What is Not Included in the Policy?
While there are a number of exclusions in a standard commercial umbrella liability policy, there are three main exclusions that business owners need to be aware of. Three provisions in the policy language preclude recovery from the insurer for the property damage to the insured’s own products, property, and work. A commercial umbrella liability policy is strictly designed to cover liability for physical damage to other persons or property, apart from the work itself, which is caused by the insured or its work. This means that the policy will not cover damage stemming from intentional acts, employment-related injuries, or liability arising out of the use or ownership of a motor vehicle.

So in short, what does commercial umbrella liability cover? It covers the insured’s legal obligations when a third party claims property damage, bodily injury, or personal injury as a result of a negligent act or occurrence and is designed to kick in when the limits of your underlying insurance policies have already been exhausted. Protecting your business with the right insurance policies plays a major role in managing the overall risk of a new venture. While most businesses will require a number of different solutions to manage their risk effectively, commercial umbrella liability insurance helps companies protect against catastrophic loss by providing additional coverage that goes beyond the scope of an insured’s primary liability policies.

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