You face all sorts of exposure to liability as you go about your daily life.
While your personal liability policies may offer some coverage, they may not be
sufficient and won’t extend to all potential
exposures.
Nationally, nearly one in every six jury
awards now tallies $1 million or more. In
one recent five-year period, the average
award for personal negligence cases went
from $264,765 to $2,959,047. That excludes
defense costs, which can run into the hundreds of thousands of dollars — even when
the defendant wins in court.
“As your income and assets increase, so
does your exposure to larger jury awards,”
says Loretta Kirchhoff, personal lines risk
manager at DLD Insurance Brokers Inc. in
Irvine. “The best way to protect yourself
against the rising exposure is through a
Personal Umbrella policy.”
Smart Business asked Kirchhoff for
more details about these types of policies.
Why should business professionals consider
a Personal Umbrella policy?
People need to protect their personal
assets above what is provided through
their standard auto, homeowners or water-craft policies for catastrophic losses.
Besides higher liability limits, you are buying broader coverage in case you are sued.
Today’s lawsuits are filed for everything
from serious injuries resulting from tragic
accidents to seemingly silly disputes. If you
are served with legal papers, you must
have enough insurance to cover your legal
liabilities.
What kinds of broader coverage do you
mean?
Your umbrella policy agrees to cover you
if you cause bodily injury, property damage, or personal injury. While your homeowner’s policy will provide coverage for
bodily injury and property damage, many
homeowner policies won’t cover personal
injury without an extra endorsement.
Generally, personal injury encompasses
false arrest, false imprisonment, malicious
prosecution, defamation, invasion of privacy, wrongful entry or eviction.
If your leisure activities involve rental of
a moped, dune buggy or boat, you may
want to explore coverage under a Personal
Umbrella policy for protection from exposure to liability should your negligence
cause a severe accident involving multiple
injuries. You should familiarize yourself
with possible exclusions in any of your
policies — including a potential umbrella
policy.
Another area of exposure is the company
vehicle. If your company car is your only
vehicle, you have access only to the limits
the company has. If you have $3 million in
assets and your company carries a typical
$1 million policy, your personal assets
could be at risk without higher limits.
When a ‘drive-other-car’ endorsement is
added to the commercial policy, you can
request the company car be added to your
Personal Umbrella policy. The umbrella
policy limits would be available once the
underlying policy limits were exhausted.
Certain umbrella policies also provide
coverage if you face liability arising from
your service on the board of a civic, charitable, or religious organization. While the
organization may have a directors-and-officers policy, it typically may only cover $1
million per occurrence. All the board members share this limit and, when that limit is exhausted, board members are personally
liable for the judgment beyond that
amount, putting personal assets at risk.
Are all Personal Umbrella policies the
same?
No. Some very unique Personal Umbrella
policies are available, offering excess-uninsured/underinsured-motorists coverage;
an endorsement that will pick up limited
domestic employment-related lawsuits;
and an endorsement that will broaden the
directors-and-officers coverage for those
on not-for-profit boards.
Talk to your agent about all of your
potential exposures, your assets and other
coverage needs.
What limits should you consider for your
Personal Umbrella policy?
As with any type of insurance, you don’t
want to buy unnecessary coverage.
You should have enough liability coverage to resolve a claim or lawsuit that will
take into consideration your current
assets, your current earnings and future
earnings. Even if you buy the top-of-the-line personal liability umbrella policy, you
can’t protect yourself against every possible claim or lawsuit. There will be exclusions in the umbrella policy, as with every
insurance policy. Work with your agent to
fully understand what your Personal
Umbrella does and does not cover.
As a CEO of your own business, you may
be allowed to schedule your Personal
Umbrella under your commercial umbrella. This can be an economical way to have
access to very high limits. If this is a route
you would like to explore, be aware that
when you schedule your Personal
Umbrella under your commercial umbrella, you will be sharing limits with your
company and the commercial umbrella
will be subject to an annual aggregate limit
versus a per-occurrence limit.
LORETTA KIRCHHOFF, CIC, is the personal lines risk manager at DLD Insurance Brokers Inc. in Irvine. Reach her at (949)
553-5690 or [email protected].
