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What Is Umbrella Insurance?
Business Owners must protect themselves from liability to the fullest extent possible. Without sufficient coverage, a lawsuit could jeopardize the financial stability of their business. While primary liability insurance provides essential protection, it may not be enough to cover all potential claims. An Umbrella Insurance Policy offers additional coverage, helping businesses mitigate financial risks associated with costly lawsuits.
Primary Insurance Coverage May Not Be Sufficient
Most businesses carry a primary commercial liability insurance policy to safeguard against claims. However, these policies have coverage limits that may not fully protect against substantial legal judgments. In cases involving catastrophic damages, settlements or verdicts could exceed the limits of a standard policy. If the primary insurance is exhausted, the business may be responsible for paying the remaining balance, potentially exposing its assets to creditors.
Umbrella Insurance Provides Additional Protection
Umbrella Insurance extends liability coverage beyond the limits of a business’s primary policy. If a claim surpasses the coverage amount of the primary policy, the Umbrella Policy steps in to cover the excess. For example, if a business carries $1 million in general liability coverage but is ordered to pay $2 million in damages, an Umbrella Policy can cover the remaining $1 million, preventing the business from bearing the financial burden.
Additionally, Umbrella Insurance may cover attorney’s fees and litigation costs associated with covered claims. However, it does not provide blanket protection. It generally covers liabilities included in the primary policy, but in higher amounts. Certain risks, such as employment disputes, professional malpractice, and wage and hour violations, may require separate endorsements or specialized coverage.
Businesses May Require Additional Insurance Coverage
Umbrella Insurance does not replace primary coverage but instead serves as supplemental protection. It only applies once the limits of the underlying policy have been exhausted. Businesses with significant public interaction, such as those operating physical locations open to customers, should strongly consider Umbrella Coverage due to the heightened risk of liability claims. Premises liability lawsuits, for example, can result in substantial settlements or jury awards that exceed standard policy limits.
Insurance Claims May Be Denied
As with any insurance policy, Umbrella Claims may be denied under certain circumstances. The most common reasons for denial include policy exclusions, failure to meet policy conditions, or disputes over coverage interpretation. If an Insurer refuses to honor a valid claim, a business may need to take legal action to enforce coverage. This can create a challenging situation in which a business defends itself against a lawsuit while simultaneously seeking payment from its insurer.
Consulting an experienced insurance claims attorney can help businesses navigate coverage disputes and protect their financial interests.
Contact the Skilled New Jersey Insurance Lawyers at Herold Law, P.A.
If you are facing difficulties obtaining coverage for a claim, the New Jersey Insurance Lawyers at Herold Law, P.A. can help. Our attorneys have extensive experience handling insurance disputes. To schedule a free consultation, call 908-679-5011 or contact us online. Our office is in Warren, New Jersey, and we represent clients in Somerville, Morristown, and throughout New Jersey.
