6 Things to Consider About Umbrella Insurance

Most umbrella insurance policies require the holder to first purchase primary insurance coverage—for example, general liability insurance, auto liability insurance, workers compensation or employers liability insurance. These are a few things to consider about an umbrella policy:Commercial Umbrella Insurance

  1. Individual judgment and individual risk

Umbrella liability insurance policies are largely a matter of the judgment of the insurer, the authors explain, and rating is almost entirely a matter of individual judgment, not only from insurer to insurer, but also varying with the individual risk. Many of the umbrella provisions are negotiable with most underwriters.

  1. Underlying coverage

A requirement for underlying liability limits of $1 million is common, the authors say. For insureds with severe advertising or other personal injury, or other special liability exposures, underlying coverage with high limits in these areas may also be required if these exposures are to be included in the umbrella coverage.

  1. Defense coverage

A significant variation in policies has to do with defense coverage, the authors explain. Almost all umbrella liability contracts have provisions that, in effect, protect the right of the umbrella insurer to take over or participate in the defense of a claim that may involve it. These policies include defense coverage for uninsured exposures, the authors say, even when the loss doesn’t appear likely to involve the umbrella contract.

Also, some contracts include defense coverage of losses when, because the underlying insurance is exhausted by the loss payment, the umbrella policy comes in as primary coverage. Some policies include defense and appeal costs within the limits of coverage while others provide them as supplementary payments outside the limits of coverage.

  1. Additional insured

Any additional insured under any policy of underlying insurance is automatically an insured under the umbrella policy. But the coverage isn’t any broader than the coverage provided by the underlying insurance.

If the underlying insurer or the insured elects not to appeal a judgment in excess of the retained limit, the umbrella insurer reserves the right to do so at its own expense. The umbrella insurer also pays for taxable court costs, pre- and post-judgment interest and disbursements associated with the appeal.

  1. Indemnity policy or pay-on-behalf-of policy

Indemnity policies don’t require the insurer to make payment to the insured until the insured has first made payment for covered damages or expenses. The language requires you to use your own money first to pay for damages and defense and then seek reimbursement.

With a pay-on-behalf-of policy the insurer promises to pay damages on behalf of the insured. This means that the insured doesn’t have to first make payment and then seek reimbursement from the insurer. Expenses for defense are normally paid by the insurer as they are incurred if the umbrella insurer has taken over the defense role, even with a pay-on-behalf-of policy.

  1. Common exclusions

The Commercial Liability Umbrella Form, CU 00 01 04 13, excludes certain coverages that apply to specific situations. The following are only a few of the exclusions provided in the form. For more information, refer to the form itself and the detailed analysis provided by the authors.

  • Liquor liability
  • Workers compensation, employers liability, and employment-related practices
  • Pollution
  • Aircraft or watercraft, and racing activities
  • Recall of products, work or impaired property
  • Electronic data

An umbrella policy might be right for you, but be sure you understand what the policy covers and what it excludes before buying.

Swingle, Collins & Associates specializes in Commercial Umbrella Insurance coverage in Dallas, Southlake, Westlake, Plano, Coppell, Irving, Argyle and the surrounding areas.  The descriptions of Commercial Umbrella Insurance coverage listed on this website are brief and subject to the provisions, limitations, and exclusions that can only be expressed in your policy and related endorsements. For additional information of how Swingle, Collins & Associates can assist in meeting your coverage needs please contact your dedicated risk manager to discuss the benefits and services of commercial inland marine insurance coverage.


The information contained on this page is provided for informational and educational purposes only. It contains general information on insurance issues and may not reflect the most current developments in insurance coverage and is unlikely to apply in all factual scenarios. The information does not include all the terms, coverage, exclusions, limitations or conditions that may be contained in the actual insurance contract language. The policies themselves must be read for those details. Sample policy forms will be made available upon reasonable request.