A client operates a large commercial real estate portfolio. They have a primary CGL policy with a $2,000,000 limit. However, they are concerned that this limit might be insufficient for a catastrophic liability claim, such as a major accident at one of their properties. They want to purchase additional liability coverage that would sit above their primary policy and provide broader coverage. Which type of policy should they consider?
- AUmbrella Liability Policy
- BProfessional Liability Policy
- CExcess Liability Policy
- DCommercial Property Policy
Show answer & explanationAnswer & explanation
Correct answer: A. Umbrella Liability Policy
An Umbrella Liability Policy provides additional liability limits above underlying primary policies (like CGL, Business Auto, Employers Liability). Crucially, it also offers broader coverage than the underlying policies, filling potential gaps and providing defense for some claims not covered by the primary policies, subject to a self-insured retention (SIR).
Why the other options are wrong
- B. Professional Liability covers errors and omissions in professional services, not general liability for property ownership.
- C. An Excess Liability Policy provides additional limits but generally follows the exact terms and conditions of the underlying primary policy, offering no broader coverage.
- D. A Commercial Property Policy covers damage to the insured's own property, not liability to third parties.
Umbrella Liability Policy
A type of liability insurance that provides additional limits of coverage above underlying primary policies and also offers broader coverage, acting as primary insurance for some exposures not covered by the underlying policies (subject to a self-insured retention).
- Provides higher limits (vertical coverage).
- Offers broader coverage (horizontal coverage/gap filler).
- Requires a Self-Insured Retention (SIR) for claims not covered by underlying policies.
Memory trick: For soaring limits and broader scope, a 'Umbrella' gives you hope.