Insurance Law Lesson 27: Umbrellas

Your liability insurance has a limit (see lesson 6). What happens if you need more than that limit?

If all you have is a single layer of coverage, then – bad faith matters aside – you are responsible for the overage.

If you want more coverage, you can request higher limits. But, primary insurance usually has a ceiling. For example, my auto carrier wouldn’t go higher than 250k/500k.

One way to go higher is get a umbrella coverage. This could be its own separate policy, or it could be part of another policy (see lesson 15).

An umbrella sits on top of one or multiple other policies/coverage parts. The underlying policies/coverages are typically listed in the umbrella’s dec page (see lesson 11). Failing to have those coverages active (even if they don’t apply to a given claim) can jeopardize umbrella coverage.

An umbrella sits above the primary policies, but it is subject to its own terms. An umbrella’s coverage might in some ways be broader than the underlying coverage. In such a case, in the liability context, the umbrella might apply as though it were primary (including a defense duty) if the underlying policy does not apply.

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