Why You Need Umbrella Insurance for You & Your Business!

Commercial umbrella insurance helps protect your business from the financial risks of large lawsuits against your company. It is designed to give you additional coverage above and beyond your liability coverage limits should they become exhausted. In other words, commercial umbrella insurance takes over when your other liability coverage limits have been reached.

In most cases, commercial auto and commercial general liability (CGL) provide up to $1 million in coverage for covered losses. But $1 million may not be enough to fully cover your business’ liability exposures. For example, if you need $3 million for a settlement, your general liability insurance would pay for the $1 million and you would be responsible for paying the additional $2 million (out of your pocket). But if you have an umbrella policy, it could cover the excess up to your limit.

The Bureau of Justice Statistics (BJS) reported that in 2001 (which is the most recent available statistics), state courts in the nation’s 75 most populated counties held an estimated 11,908 trials in tort, contract, and real property cases. The statistics provided in Table 1.1 below shows the prevalence of tort verdicts over $1 million.

Verdicts of over $1 million can be fairly common, depending on the exposure. For example, for insureds manufacturing products, the 2001 BJS statistics show a 39.1% chance of a verdict over $1 million in a product liability claim. For premises exposures (which is most common among policyholders), the chance of a verdict over $1 million is 9.1%. These statistics clearly indicate that any policyholder who gets sued can be exposed to a significant probability of liability over a typical $1 million limit of a primary business auto or CGL policy.

Multi-million dollar verdicts are more common in wrongful death claims. Based on the total number of tort trials, BJS reported a distinct portion of concerned claims involved one or more persons died as the result of the actions or inactions of the defendant. Table 1.2 shows the median size of plaintiff awards in death claims tried to a verdict in 2001.

These statistics demonstrate that a policyholder’s exposure to verdicts of over $1 million escalates when plaintiffs allege that the policyholder is responsible for someone’s death. In other words, it is much more likely that the policyholder will be responsible to pay more than $1 million if the claim involves death.

Another way of assessing the level of a policyholder’s potential exposure to claims of over $1 million would be to survey the top 100 jury verdicts entered in a given year. Although it’s not that reliable, such a survey could enable the policyholder to have an estimate of the probable maximum severity of a variety of claims. In 2005, the top 100 jury verdicts included several cases involving common auto and CGL exposures, some of which are shown in Table 1.3.

Such cases demonstrate the importance of purchasing coverage in excess of the typical $1 million limit commonly provided by most auto and CGL policies to provide extra liability protection for your business.

Remember, the more your business interacts with customers and clients, the higher your liability risk will be. And your risks can even be greater if your employees are using heavy machinery or dangerous equipment.

To learn more about how umbrella insurance can give your business an extra protection, get a quote today. As always, our team at DOK Insurance Agency is here to help where we can. Please feel free to email info@dokagency.com, chat with us live, or give us a call at (425) 242-5252.

President
1500 Benson Road South, Suite 201
Renton, WA 98055

Office:  425-242-5252
Fax:       425-948-1755
dom@dokagency.com