Umbrella Liability

The commercial umbrella liability policy provides liability coverage in addition to your general liability, auto liability, and employers’ liability (part of the workers’ comp policy).

Umbrella Coverage Example

If you have a five million dollar umbrella policy and an auto liability policy with one million dollars of coverage, the total amount of protection you have for an auto accident is six million dollars.

Underlying Coverage

Do the limits of coverage for your underlying policies meet the umbrella requirements? Each umbrella policy will outline the coverage limits for the underlying policies. Failure to meet these limits may mean a gap in coverage between the liability coverage and the umbrella.

Standard Underlying Insurance Requirements for Umbrella Liability

Auto Liability
$1 million

General Liability
$1 million per occurrence
$3 million aggregate

Employers’ Liability
$500K each accident
$500K disease – policy limit
$500K disease – each employee

Concurrence of Policy Dates

Are the policy dates of your underlying policies the same as the umbrella policy? Having a single date prevents the problems of missing a renewal date and issues of aggregate limits of coverage.

Mental Anguish

Are mental injury and mental anguish a part of the policy definition of bodily injury in your umbrella policy? Many policies define bodily injury as only when there is a physical injury. Claims of emotional distress are certainly not uncommon.

I often get push-back from insurance agents on this coverage. About half of the insurers seem to offer “mental injury as bodily injury” coverage. They all should. (Email me if your insurer refuses to add mental injury as bodily injury coverage. I can provide copies of endorsements other insurers have used.)

Multiple Liability Policies

If you have more than one general liability policy, be sure your umbrella policy applies as excess coverage over each. (While I can’t think of a good reason why a bank would have more than one general liability policy, I quite often see where an insurance agent has purchased separate business owner’s insurance policies for leased branch buildings. I can’t explain why this is done — I just know I see it fairly often.)

Personal Injury Exclusions

Review the definitions and exclusions relative to personal injury. You may find additional exclusions in your umbrella policy or different definitions from those in the underlying policies. Internet marketing activities may be excluded or limited.

Review your umbrella policy exclusions. The coverage may be more restrictive than your primary policies.

Coverage Limits

The limit of umbrella liability coverage you buy for your bank will depend on the size of your bank, where you’re located, and the cost of coverage. I consider five million dollars to be the minimum for even the smallest bank. Get quotes at various limits of coverage so you can judge the value of higher limits.

Common Exclusions

Your umbrella policy will have exclusions similar to those on your general liability and auto policy. Here are some of the exclusions that will probably be listed on your insurance:

  • Pollution (for coverage, buy pollution insurance).
  • Employment practices — such as discrimination or wrongful discharge.
  • Asbestos, mold, or fungi.
  • Contractual liability.
  • Employee benefit plan errors (buy fiduciary responsibilities liability insurance).
  • Professional liability (buy professional liability insurance).
  • Injuries to employees (covered by workers’ compensation).
  • Aircraft — both owned and non-owned.
  • Owned watercraft and non-owned watercraft over twenty-six feet.
  • Liquor liability for those in the business of making, selling, or serving alcohol.