Umbrella policies are insurance policies that cover amounts above those specified under one or more other primary policies, and which do not pay until the losses exceed a certain sum. Such policies are sometimes also referred to as excess insurance.

The following types of primary liability policies may serve as the basis for additional coverage associated with an umbrella policy:

  • Aircraft liability
  • Auto liability (personal lines)
  • Business auto policy (BAP)
  • Commercial general liability (CGL) policy
  • Employment practices liability (EPL)
  • Homeowners insurance
  • Watercraft liability
  • Workers’ compensation

insurance umbrellaAs an example of how an umbrella policy works, consider a business insured that has a commercial general liability policy that provides coverage of $1 million per occurrence with a $2 million total. The purchase of a $2 million umbrella policy, theoretically, could extend the underlying coverage to $3 million per occurrence or $4 million in total.

Protecting against the threat of a lawsuit is another reason that a business might want to purchase an umbrella policy in addition to an underlying commercial general liability policy. If, for example, claims filed by a shopper in a retail outlet for injuries allegedly suffered in a fall exceed the limits of a primary CGL policy, an umbrella policy could protect the business from having to pay out-of-pocket for medical services or legal fees in excess of the base policy.

The type of umbrella policy coverage will vary with the type of business. A law firm or accounting firm that entertains clients might consider an umbrella policy for increased liquor liability coverage, while an auto body shop may need additional garage liability coverage.

Legal defense and appeals costs needed to protect the insured in the event of a claim may also be covered under an umbrella policy.

Exclusions can play an important role in determining the amount of additional insurance provided by an umbrella policy.

An insured with questions about a current or proposed umbrella policy can speak with their insurance agent or an insurance attorney.

Bill Hager’s Experience as an Umbrella Insurance Policy Expert

Umbrella Policy Expertise as an Insurance Regulator. I have had extensive and substantive experience relating directly to umbrella insurance policies (inclusive of commercial auto policies) including interpreting policy language and determining the insurer’s obligations under such policies.

As a regulator for many years in five positions ((i) Assistant Attorney General assigned to the Department of Insurance (Iowa), (ii) First Deputy Commissioner of Insurance, (iii) Commissioner of Insurance, (iv) administrative law judge, and (v) Executive and Member of the National Association of Insurance Commissioners (NAIC)), along with his staff, Mr. Hager approved (or disapproved) of the language of umbrella insurance policies used by each of the 1,000 property casualty insurance companies doing business in the state. This regulatory action also included the approval of most all policy application forms and policy forms themselves in use today.

Service as an Expert Witness as to Umbrella Policies and Their Agents. Along these same lines, Mr. testifies frequently as an expert witness and has so qualified as an expert in several of the states as an expert witness as to umbrella policies and the agents that sell them.

Umbrella Insurance Policy Expertise: NAIC. While Commissioner, Mr. Hager also served as a member of the National Association of Insurance Commissioners (“NAIC”), (including membership on its Executive Committee), the nationwide organization of all state insurance commissioners. That organization has responsibilities for establishing model insurance administrative regulations and model statutes for consideration by all of the states. While with the NAIC, he served as a member of the Commercial Lines Committee: This Committee exercised national oversight over the functioning of commercial lines insurance, namely umbrella policies (which provide coverage over both personal and commercial underlying coverages).

Click on the link to read more about Bill Hager’s experience as an umbrella insurance policy expert.


Material for this article was taken from a collection of industry sources relating to the subject.

In all of the general statements here, see the state law of the controlling jurisdiction. Every case is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.

This blog is provided for educational purposes only. It is not intended to provide legal advice or an opinion in regard to any topic discussed. The blog should not be used as a substitute for legal advice from a licensed attorney in your state.