The Commercial Umbrella Policy

A Commercial Umbrella Liability policy is a coverage option that should be seriously considered by businesses of all sizes. Liability claims and court decisions involving millions of dollars are common. Any business can be found legally responsible for large, financial judgments. A Commercial Umbrella Liability Policy increasingly referred to as an excess policy, can provide an additional layer of insurance protection to handle major losses.

The coverage form is still not standardized. They may vary significantly among companies and some jurisdictions may create unique coverage issues. Punitive damages are an example. Some states only permit responsible parties to pay punitive damages; others allow them to be paid by insurers. Commercial umbrellas can also differ widely on the exclusions they contain.

A business owner may consider an accident that does not involve a fatality to be one that can readily be handled by regular coverage. The reality is that such an accident may result in substantial medical care, lost income and other expenses. Can your business afford a payment that exceeds a million dollars? Think of accidents involving vehicles that, today, are much safer than even five years ago. That means that accidental deaths are less likely while the chance of severe injury has increased. Severe head trauma can send a claim’s cost soaring. It may take up to seven years to determine the ultimate extent of injury. Recovery is often slow and sporadic. These elements combine to make regular insurance coverage insufficient.

A business may have auto liability coverage but insurance limits of more than $500,000 are rare. This is because insurers are reluctant to offer higher coverage without sufficient premium. When the insurance coverage provided by a business auto policy is not enough to meet the amount of a loss, the business is responsible for the difference.

An Umbrella Liability policy could be the difference between bankruptcy and an on-going business. The Umbrella policy would take over where the business auto policy stopped, providing defense coverage and additional limits to pay large judgments.

There are no standard Umbrella Liability policy forms; each company has their own variation. Each form offers different options that can help tailor coverage to specific business needs. One thing to remember is that an Umbrella Liability policy will not cover everything; there are exclusions in this form as in any other contract of insurance. However it still represents an excellent method to help shield a business from catastrophic claims. Contact an insurance agent to discuss securing this valuable form of liability coverage. It could help preserve your business.

COPYRIGHT: Insurance Publishing Plus, Inc. 2014

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.


Discontinued Operations

Mergers and acquisitions are very complex legal transactions that, besides substantially altering regular operations, can also affect an organization’s insurance needs. Unforeseen liabilities may arise for merged entities that produce tangible products. One area of concern is a discontinued operation.

Once a product enters the marketplace, the liabilities associated with that product do not cease with the sale or merger of the original manufacturer. Such liabilities still exist even when that particular product is no longer produced. Liability claims often occur many years after the product was first produced or sold. In other words, liability still exists for operations that have been discontinued.

If the original business owner only sells its assets and retains its corporate structure, it will also retain the liabilities connected to the original operations. A business can purchase discontinued operations coverage to help in such instances. For example, Utility Trailers, Inc. built small trailers. Utility Trailers’ owners accept an attractive offer from another company and sell the business on an ‘assets only’ basis. Utility Trailers, Inc. was not dissolved as a corporate entity. A year later, some customers sue Utility, claiming loss caused by defective trailers. Their Discontinued Operations coverage will respond to the lawsuits.

Discontinued Operations coverage would provide coverage for bodily injury or property damage caused by defective products. The same coverage can be designed to provide coverage for contractors that have ceased doing business. It would be a disappointing situation to find that after a product has been discontinued or assets sold, all profit from the sale – and perhaps more – has been taken away due to a defective product that is still the responsibility of that entity. So, contact your agent and discuss whether you have continuing liability for a discontinued operation.

COPYRIGHT: Insurance Publishing Plus, Inc. 2015

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Equipment Breakdown Protection

Equipment Breakdown Coverage policies handle a substantial loss exposure to items such as unfired vessels - Air, steam or water tanks, refrigeration systems, rollers, steam pressers, ironing equipment, steam cookers, generators, chemical processing tanks, motors, switches and controls, compressors, pumps, gears, etc. Breakdown policies are important. They fill a large gap! Commercial property policies typically exclude losses involving machinery or equipment breakdowns. The breakdown form provides the following coverages:

1. Property Damage–This coverage pays for direct damage to covered property (certain types of office machinery and equipment) that has to be listed (described) in the policy.

2. Expediting Expenses–This coverage applies to extra costs insured experiences in order to make temporary repairs and to speed-up (expedites) the permanent repair or replacement of damaged property.

3. Business Income and Extra Expense–Extra Expense Only - These coverages may be purchased together or extra expense coverage alone. For example, a covered business loses most of its records due to a breakdown of its main server. Most of the costs to restore the information would be handled under this option.

4. Spoilage Damage–Spoilage damage to raw materials, property in process or finished products is covered when that property is in storage or in the course of being manufactured. Coverage applies to such property that the insured owns or is legally liable under written contract and spoilage is due to a lack of or excess of power, light, heat, steam or refrigeration.

5. Utility Interruption–This coverage is available ONLY when a customer also purchases coverage for Business Income and Extra Expense – Extra Expense Only or Spoilage Damage. This coverage responds to loss involving equipment breakdown created by loss of utility service (gas, electric, water or communication). Also, the loss or service must last beyond the time-limit that appears on the policy (a sort of time deductible).

6. Newly Acquired Premises–This feature automatically covers newly acquired premises purchased or leased by the insured and the period of protection depends upon the length of time selected for this coverage (i.e. such as 30 days, 60 days, etc.).

7. Ordinance or Law Coverage–The Ordinance or Law Exclusion eliminates coverage for loss created by the imposition of ordinance or laws affect the rebuilding of the damaged property. This coverage pays such costs, within guidelines in the coverage, provided any increase in the loss amount is necessary due to the enforcement of any laws or ordinances in force at the time of the breakdown which regulate the demolition, construction, repair or use of the building or structure.

8. Errors and Omissions–This coverage pays for loss or damage that would have been covered except for the insured’s error or unintentional omission in describing covered property, a failure to include any premises owned or occupied by an insured when coverage began or, the insured’s error or unintentional omission that results in the company canceling coverage at one of the insured's premises.

9. Brands and Labels–This provision pays part of a company's expense to remove and re-label its own, salvaged merchandise.

10. Contingent Business Income and Extra Expense–Extra Expense Only Coverage - This Protection applies to loss resulting from a breakdown to equipment at premises upon which the insured is dependent upon in order to run its own operation, such as a key materials supplier.

Be sure to talk to a qualified insurance professional in case you need details on how to best protect your critical business equipment.

Norris Insurance logo