What is an Umbrella Insurance Policy?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Umbrella Insurance Policies are a form of excess coverage that is broader than the underlying insurance. When your primary insurance has been exhausted and is not enough to cover the insurance claim, an umbrella policy will protect you from excess judgments stemming from the loss (2 A.L.R.5th 922). It can be used as a form of risk management for unforeseen losses not covered in your primary insurance and protect you from additional costs that go beyond your plan’s limit. The availability of umbrella insurance coverage can often be found in provisions of your underlying policy.

Umbrella Insurance policies have two goals:

 “(1) to act as excess insurance in situations where comprehensive general liability (CGL) or other primary coverage limits have been exhausted.

   (2) to drop down and pay claims that fall outside of coverage provided by insured's primary insurance program.”

*Scottsdale Ins. Co. v. Safeco Ins. Co. of Am., 111 F.Supp.2d 1273 (2000).

Although excess liability insurance is similar to an umbrella insurance policy in regard to the fact it comes into effect after your primary insurance has been exhausted, it differs because it usually must follow the form of the underlying primary insurance. It applies the form found in the underlying insurance unless it expressly states the contrary in its policy. This makes this type of policy not as appealing as an umbrella insurance policy because it is more restrictive.  In an excess liability insurance plan, there is not a “drop-down” feature to cover events not specified within the primary insurance. This feature can be found in umbrella insurance policies making it a better risk management tool by taking into account unlikely events in the rare circumstance that they occur and not being limited by your underlying insurance. The “drop-down” feature can be seen as a vertical exhaustion of your multi-layered insurance. An umbrella insurance policy will protect you from additional costs when your limit has been exceeded.

However, while these labels generally help explain what type of insurance policy you have, it ultimately comes down to the contractual language found within your policy. In Florida, an insurance policy must be construed as a whole, giving each provision its full effect. Tudor Insurance Company v. American Casualty Company of Reading Pennsylvania, 274 F.Supp.3d 1278 (2017).  

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at[email protected].

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