You’ve seen it in the news. A crane falls causing bodily injury and property damage; a tool is dropped from a construction site scaffold, and the injured party receives a multi-million dollar loss judgment. As an insurance professional, these stories should make you wonder, or rather, hope that umbrella coverage was in place to protect these insureds from large claims that could ruin their businesses.

Obtaining an umbrella quote for your client can be relatively quick, and, in the current marketplace, the policy is generally very affordable. In many cases, if your client has no umbrella policy, a portion of the savings from what is often a significantly less expensive general liability policy can be applied toward the purchase of commercial umbrella coverage.

Umbrella coverage is available for almost every class of business – from contractors (artisans and general contractors) to service businesses (child care and beauty parlors) to mercantile (antique stores, bars, restaurants and taverns) to manufacturing (toys, playground equipment and medical equipment). The list is practically endless. Every business, regardless of the nature of the operation, should receive an umbrella quote option. It is the perfect add-on to any liability policy.

Satisfies requirements

Typically, umbrella coverage limits are in excess of the insured’s general liability, auto liability and employers’ liability coverages. It also can be extended over other coverages such as liquor liability. Quite often umbrella coverage is required as a result of a lease agreement or other contractual relationship. Such a requirement can be satisfied easily and inexpensively through an umbrella policy while simultaneously providing improved coverage and peace of mind for your client.

The liability limit on any umbrella policy begins at $1 million, with limits of $2 million to $5 million also being very common. Much higher limits also are available for insureds whose operations or contracts require that certain amounts of coverage be in place, such as, surface mining operations or vehicle manufacturing. The more hazardous a product or activity is perceived, the greater the potential for a multi-million dollar legal battle. While a manufacturer, such as a customized motorcycle manufacturer, may have taken every appropriate precaution, the failure of some part of the motorcycle could result in a claim for which umbrella limits in excess of $5 million are advisable.

Coverage for defense costs

Additionally, a commercial umbrella policy provides coverage for defense costs that are outside the coverage limit. This is an extremely important element in umbrella coverage. It provides clients with more coverage in the event of a lawsuit where the judgment could potentially exceed the coverage provided in their general liability policy. The cost to defend the insured would be paid in addition to the policy limit, not as part of the policy limit, making this a critical option.In the event of a serious liability loss, many businesses will face possible bankruptcy, even closure. This sad scenario could quite possibly have been avoided with a minimal investment in a commercial umbrella policy. Although many clients may be facing tough economic situations during these challenging times, paying a little extra for coverage that could protect their livelihood should be considered money well spent.

Richard Trippe is the branch manager of Burns & Wilcox’s Baltimore, Md., office. He can be reached by email.