Commercial Umbrella Insurance

What is commercial umbrella insurance?

Commercial umbrella insurance is a type of liability coverage that extends beyond the limits of a company’s primary insurance policies, such as a general liability or commercial auto insurance policy. Commercial umbrella insurance provides additional protection against potentially catastrophic losses resulting from legal claims and judgments.

Two example situations that demonstrate the importance of commercial umbrella insurance are:

1. A landscaping company faces a lawsuit after an employee accidentally damages a client’s expensive property, resulting in a settlement that exceeds the company’s general liability coverage. Commercial umbrella insurance would step in to cover the remaining costs.
2. A delivery service in Florida is involved in a severe accident, causing significant injuries to multiple individuals. The combined medical expenses and legal settlements surpass the limits of the company’s commercial auto insurance policy. In this case, the commercial umbrella insurance would provide additional coverage to protect the business from financial ruin.

Need help with a matter related to commercial umbrella insurance? Schedule your consultation today with a top insurance attorney.

In Florida, which laws and regulations apply to commercial umbrella insurance?

Commercial umbrella insurance regulation primarily stems from the state’s insurance code and the rules promoted by the Florida Department of Financial Services. Provisions related to commercial umbrella insurance can be found in the following areas:

1. Chapter 624 of Florida Statutes governs insurance contracts and defines general terms applicable to commercial umbrella policies, including liability coverage and excess insurance.
2. Chapter 627 of Florida Statutes provides regulations for various types of insurance, including commercial liability insurance, and outlines the standards and requirements for policy provisions and limits.

It is essential for businesses operating in Florida to understand and comply with these laws and regulations to ensure they have adequate commercial umbrella insurance coverage. Additionally, companies should consult with an experienced insurance professional or attorney to ensure compliance with industry-specific regulations and requirements that may also apply to their operations.

By understanding the purpose and application of commercial umbrella insurance in Florida, businesses can better protect themselves from potential financial disasters resulting from legal claims and judgments. With a thorough knowledge of the relevant laws and regulations, companies can make informed decisions about their insurance needs and ensure compliance with all legal requirements.

What are common disputes regarding commercial umbrella insurance that lead to litigation?

The following disputes are among the most common in actions regarding commercial umbrella insurance in insurance procurement and coverage matters:

• Policy Interpretation: Disagreements over the language and terms of a commercial umbrella policy, including coverage limits and exclusions, can lead to litigation between the insured and the insurer.
• Scope of Coverage: Disputes may arise over whether a specific claim or loss event falls within the coverage provided by the commercial umbrella policy, mainly when the policy’s language is ambiguous or unclear.
• Allocation of Defense Costs: Insurers and insured parties may disagree on allocating defense costs between the primary and umbrella policies, particularly when multiple claims or parties are involved.
• Bad Faith Claims Handling: Insured parties may allege that the insurer engaged in bad faith by delaying or denying coverage or failing to settle a claim within the policy limits.
• Drop-Down Coverage: Disputes can occur when an underlying policy’s limits are exhausted, and the commercial umbrella policy is expected to “drop-down” and provide primary coverage for the remaining claims.

We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What measures should an insurance carrier take to minimize the risk of litigation over commercial umbrella insurance? 

To successfully mitigate the risk of litigation over commercial umbrella insurance in insurance procurement and coverage matters, insurers should follow these steps:

• Clear Policy Language: Draft commercial umbrella policies with clear, unambiguous language that is easy to understand, including well-defined terms, conditions, and exclusions.
• Consistent Underwriting Guidelines: Establish and maintain consistent underwriting guidelines to ensure that commercial umbrella policies are issued according to the insurer’s risk appetite and capacity.
• Comprehensive Risk Assessment: Conduct thorough risk assessments when underwriting commercial umbrella policies to identify potential exposures and ensure that policy limits and coverage are appropriate for the insured’s needs.
• Regular Policy Review: Periodically review and update commercial umbrella policies to ensure they remain current and compliant with changes in laws, regulations, and industry best practices.
• Effective Claims Handling Procedures: Implement efficient claims handling procedures that promote timely investigation and resolution of claims and provide clear communication with the insured throughout the process.
• Ongoing Training and Education: Provide regular training and education for underwriters, claims adjusters and other relevant personnel to ensure they are knowledgeable about commercial umbrella insurance policies and industry trends.

By following these measures, insurance carriers can minimize the risk of litigation over commercial umbrella insurance and foster long-lasting relationships with their insured clients.

What must be proven to successfully file a lawsuit regarding commercial umbrella insurance, and what are common legal defenses to those claims? 

To file a lawsuit regarding commercial umbrella insurance in Florida, plaintiffs must first comply with procedural requirements, such as timely filing the claim and providing notice to the defendant(s) as per the Florida Rules of Civil Procedure.

Next, the elements that a plaintiff must prove include:

• Existence of a valid commercial umbrella insurance policy;
• The policyholder’s compliance with policy terms and conditions;
• The occurrence of a covered loss or event under the policy;
• The damages or losses sustained by the plaintiff; and
• Causation, demonstrating that the policyholder’s negligence or wrongful acts led to the plaintiff’s damages.

Legal defenses that may be raised against commercial umbrella insurance claims include:

• Lack of Coverage: The defendant argues that the claim is not covered under the terms of the policy
• Exclusions: The defendant asserts that specific policy exclusions apply, rendering the claim ineligible for coverage
• Policy Limits: The defendant argues that the claim exceeds the policy’s coverage limits
• Misrepresentation or Fraud: The defendant alleges that the plaintiff misrepresented or concealed material facts, voiding the policy
• Late Notice: The defendant contends that the plaintiff failed to provide timely notice of the claim, violating policy terms

To see what actions or defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What is commercial umbrella insurance?

Commercial umbrella insurance provides additional liability coverage beyond the limits of underlying policies, such as general liability or commercial auto insurance. It is designed to protect businesses from significant financial losses in the event of a lawsuit or claim.

2. Is commercial umbrella insurance mandatory in Florida?

Commercial umbrella insurance is not required by law in Florida. However, businesses may purchase it for added protection and to meet contractual obligations, such as lease agreements or vendor contracts.

3. How much commercial umbrella insurance coverage should a Florida business purchase?

The amount of coverage needed depends on factors like the size of the business, industry risks, and assets at stake. Companies must consult with a licensed insurance professional to assess their risk exposure and determine the appropriate level of coverage.

Have more questions about a commercial umbrella insurance-related situation?

Crucially, this overview of commercial umbrella insurance does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.

Here are some blogs written by JB attorneys that provide more information about commercial umbrella insurance:

• An Insurer’s Duty to Defend the Insured (jimersonfirm.com)
• Benchwarmer Effect: The Sobering Reality of Coblentz Agreements (jimersonfirm.com)