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.