No matter how hard we try, or how hard we believe, there will always be a flaw in our court systems. Where there is a law there is a loop hole, and where there is a court there is the opportunity for human error. New York’s highest court was forced to review and amend its decision regarding a liability claim filed by Jeffrey Daniels of Garden City, New York.
Comparing Excess Liability vs Umbrella Policy
If you thought that umbrella insurance and excess liability insurance were the same thing, think again. While they’re both meant to serve a similar purpose – increasing your liability limit on your existing general liability policy – the ways they work are a bit different. There are a number of reasons that a company may need umbrella or excessive liability insurance. Some of these include:
• When the company expands due to a merger or internal growth, and the existing insurance policy doesn’t cover the full extent of the company’s larger exposure to liabilities
• When the company is involved in a major court case, in which a jury verdict or appellate court decision requires them to increase their liability limits
• When upper management is changed, and the new management decides the company should have more liability coverage
• When the company asks their insurance provider for a higher liability limit, and the insurance company offers an umbrella policy or excess liability policy in addition to the pre-existing underlying liability coverage instead
The term “umbrella” liability coverage is a metaphor for the actual function of the policy. By providing an additional increase to the liability limits of an existing policy, it is, in effect, acting as an umbrella to cover the existing policy from liability outside the existing policy’s limits. One of the biggest benefits of an umbrella policy is that it can sometimes provide additional coverage that wasn’t available as an option in the underlying policy. These policies broaden the scope of business insurance liability in order to close the gaps in coverage.
Excess liability also provides support that increases the limits of liability in a business insurance policy, but the terms of the coverage are more strictly structured. An excess liability policy will increase the per person/per occurrence limits of your existing policy. When a company takes out an excess liability policy, it is explicitly linked to the general liability policy that it’s supporting. This means that it uses all of the same terminology, including definitions and limitations, of the underlying policy. Also, it does not have any effect on any other insurance policies that the business may have. Due to its more restrictive limitations, excess liability coverage is sometimes not the best options, as it may actually wind up being more restrictive than the underlying policy. That’s why it’s important to always read the fine print and ask as many questions as necessary before signing up for any policies.
When you’re trying to decide on an insurance policy to extend your liability limits, and you’re looking at excess liability vs umbrella insurance, it’s a good idea to get in touch with a knowledgeable insurance professional who can help you assess your individual needs. Request a quote today to speak with a representative who can help!