Peter Crowe: Opt for a High Umbrella Limit

Posted September 25, 2024

Author – Peter Crowe, Account Executive – Horst Insurance

If you own or manage a business, you’ve likely heard of an Umbrella policy. Sometimes referred to as an Excess Liability policy (there are differences between an Umbrella policy and an Excess policy, but for these purposes we’ll consider them interchangeable terms), an Umbrella is an additional layer of liability protection, over and above your primary liability policies, typically your General Liability, Auto Liability, and Employers Liability. During a given policy period, it is possible that the per occurrence limits (usually $1,000,000) in those primary policies could be exhausted in the event of a large claim or multiple claims. Without purchasing additional layers of protection provided in an Umbrella policy, that puts the assets of your business greatly at risk. Standard Umbrella/Excess policies can be purchased in million-dollar increments from $1,000,000 to almost as high as you’d like (we see some clients with $50,000,000 or more).

To assist in evaluating the question of how much Umbrella limit to purchase, let’s look at a few determining factors:

• Nature of the business. How risky is your product/service? Are you creating more risk by the type of product you produce or sell? Is there a greater propensity for potential injuries, leading to substantial lawsuits? Do you have a fleet of trucks on the road that could cause an accident resulting in major injuries? Do any of your employees drive on company business that could do the same?
• Assets of the business. What is the value of your business assets including real estate, equipment, property owned, etc.? How much could you lose in a massive lawsuit?
• Location and legal climate. There is no question that we live in an increasingly litigious society, and we continue to see “nuclear” jury verdicts that go above and beyond what may seem reasonable. (If you want to take a deep dive into the numbers, you’ll also see higher verdicts in highly populated cities vs rural locales.) What is the trend in the courts?

“But doesn’t choosing a higher Umbrella limit just make me a bigger target for an enterprising plaintiff’s attorney to go after?” That certainly is a viable argument when evaluating your options. But as an experienced Risk and Insurance Advisor, more often than not I would err on the side of caution. If you end up being a target of any kind of lawsuit, I would rather you have a large limit to satisfy a lawsuit than not having a large enough limit for your business to survive that lawsuit’s aftermath.

There are many factors to consider when determining a proper Umbrella limit. If you need assistance in thinking that through, please call our office at 717-560-1919. We’re here to help.