A Commercial Umbrella Liability policy is designed to provide protection in the event of large or catastrophic losses that may exceed the required primary liability policies limits. Umbrella policies are offered to provide a layer of liability coverage over the limits of a Commercial Automobile, General Liability, Workers Compensation – Employers Liaiblity, Watercraft or Aircraft liability policy. The primary function of the Umbrella Liability policy is to respond when the primary policy responding to the covered loss is exhausted (the loss exceeds the Occurence limit of the underlying Auto, General Liability, etc.) or the Aggregate Policy Limit is exhausted (Aggregate Limit exceeded).
Example of a Commercial Umbrella Policy Claim:
A company owned vehicle is involved in a accident. There is serious bodily injury involved. The primary Commercial Automobile policy has a $1MM Occurence limit. There is a $1MM Commercial Umbrella policy in effect. In the ensuing litigation the claim is adjudicated or settled for $2MM. The Commercial Auto Policy will respond to the first $1MM up to its Occurence Limit and the second $1MM is responded to by the Commercial Umbrella Liability policy. Absent the Umbrella policy, the second $1MM would have to be paid for by the company’s assets once a judgement is awarded. One caveat, in today’s legal environment a party does not necessarily have to be at-fault to have a judgement awarded against them.
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