Examples of Umbrella Insurance Claims

Posted By: Team Moody,

For business owners, insurance is a valuable investment. However, you might easily use up the limits of these policies if you lose in an expensive legal battle.

So, what is your next action? Get an MD Umbrella Insurance. Below is a list of coverage with real-life examples and exclusions where this policy becomes useful.

Coverage List

Umbrella insurance has two purposes. One, it increases policy limits on standard coverages such as general liability, employer’s liability, and auto liability. Two, this policy covers liabilities that aren’t included in standard policies.

General Liabilities

General liability insurance (also known as CGL) can protect your business from third-party injuries and property damages. These expenses include medical expenses for injuries, legal fees, damages if you lose the case, and repair costs for property damages.

Example 1: Bodily Injuries

A client sustains injuries after slipping in the stairs of your business. These injuries resulted in a partial disability. The client sues you and wins the case.

When you have general liability insurance, the insurance provider will pay for the medical expenses and legal fees, including damages up to the extent of the covered limit. This is where the umbrella policy becomes useful.

Most often, general liability insurance has a $2M policy limit. The damages amount to $3M, including all medical expenses. The CGL covers the first $2M, and an umbrella policy pays the remaining $1M.

Sometimes, body injuries don’t manifest physically but could reduce a person’s capacity to work or function. For example, a tenant becomes ill because of molds in your apartment unit.

Example 2: Property Damages

Aside from body injuries, you can be sued for property damages. The principle is the same, except it involves properties.

With CGL, you can reimburse or claim payments on legal fees and repair costs. At the same time, the insurance provider may also shoulder the cost of replacing some inventories if necessary.

Still, the coverage depends on your policy term (CGL). You can include anything that is not covered in the standard policy in the umbrella insurance. However, there are other coverages that you might need to consider first.

In this insurance, a person must have inflicted damages on the property, whether intentional or not.

Employer Liabilities

In this insurance policy, coverage involves employee-related cases. Usually, a worker’s compensation can cover these costs. But, labor-related litigation is more expensive than other legal cases.

Example 3: Employee Lawsuits

The standard limit of worker’s compensation is $100,000 up to $500,000, depending on terms and your business location.

A worker sues you for extreme back pain due to constant strenuous activities which could have been prevented. Then, this employee wins. The $100,000 will be exhausted first (if the limit is this amount).

For small businesses, this amount could easily be used up if the cause is employer negligence. But, with umbrella insurance, you can increase the limit.

Commercial Auto Liabilities

This insurance should be related to the official activities of your business. You can still be sued and obligated to pay if the employee uses the company vehicle for a personal errand.

However, you can charge the employee for this kind of negligence. One caution, though! Make sure to ask the advice of your legal team about charging an employee for these costs.

Example 4: Company Vehicle

Your employee goes to a client’s place to install and uses the company vehicle to bring the product. On the way, he hit another car and caused a pile-up.

The other drivers sue your business and win more than $3M damages. The auto insurance will cover a part of the amount up to the extent of the policy limit. On the other hand, the umbrella policy absorbs the remaining amount if you have one.

Liabilities Where Umbrella Policy Does not Apply

Professional Errors

Professional liability can cover omissions by accident and professional errors. However, you can’t extend the limit to this policy by way of umbrella liability. Why? Because the risks of malpractice or omissions are too great.

Employment Practices

EPLI (Employment practices liability) is limited to employee-related discrimination issues. These issues include unfair treatment, unjust termination, and harassment.

Property Insurance

There’s a difference between property damage by liability and property insurance. Property insurance often covers damages brought by natural disasters or uncontrolled events.


Determining the limit of your umbrella policy could be difficult, and knowing if you need one is equally vexing. During the discussion with your provider, make sure to do two things.

First, be prepared for all the information needed, such as the policy limit of your auto liability, employer liability insurance, and CGL. Lastly, mention if you carry those three policies where umbrella insurance doesn’t apply.

About Moody Insurance Worldwide

Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.