What is commercial umbrella insurance?
Commercial umbrella insurance can provide additional liability limits over qualifying underlying policies shown on the umbrella schedule. For contractors, the underlying coverage commonly includes general liability, commercial auto liability and employers liability.
When a covered claim exceeds the applicable underlying policy limit, the umbrella may provide additional limits, subject to its own terms, definitions, exclusions and retained limits.
An umbrella is not simply “more coverage for everything.” It must be coordinated with the policies underneath it.
Why contractors consider umbrella coverage
Contractors can face severe claims involving vehicles, employees, subcontractors, active jobsites and completed work. A serious accident can exceed the limits of a primary liability policy.
Umbrella coverage may be considered because of:
- Contract requirements for higher liability limits
- Larger commercial or public projects
- Vehicle fleets or heavy trucks
- Work around occupied buildings or the public
- Subcontracted operations
- Significant completed-operations exposure
- Higher-severity trades or projects
- A desire to protect the contractor’s business assets
Policies an umbrella may sit over
Depending on the umbrella form and schedule, qualifying underlying policies may include:
- Commercial general liability
- Commercial auto liability
- Employers liability within workers’ compensation
Other policies are not automatically included. Professional liability, pollution liability, cyber liability and employment practices liability commonly require separate review and may not be covered by a standard commercial umbrella.
Underlying insurance requirements
The umbrella policy may require the contractor to maintain specified limits on each underlying policy. If a required underlying limit is not maintained, the contractor may be responsible for the difference before the umbrella responds.
Ford Agency should review:
- Every policy listed on the umbrella schedule
- Required underlying limits
- Policy dates
- Named insureds
- Covered operations
- Vehicle and driver schedules
- Employers liability limits
- Any retained limit or self-insured retention
Umbrella versus excess liability
The terms umbrella and excess liability are sometimes used interchangeably, but the policy forms may differ.
A follow-form excess policy generally provides additional limits following specified underlying coverage, subject to the excess policy’s terms. An umbrella may offer some broader protection in certain situations, but that should never be assumed without reviewing the actual form.
The important issue is not the label. It is what the policy covers, which underlying policies it recognizes and what exclusions apply.
Contract requirements
A project owner or general contractor may require limits higher than the contractor’s primary policies provide. For example, a written agreement may require a total liability limit supported by a combination of primary and umbrella coverage.
Contractors should send Ford Agency the complete written insurance requirements rather than only requesting a certificate showing a particular number.
The review may need to address:
- Total required limits
- Per-occurrence and aggregate requirements
- Completed-operations requirements
- Commercial auto limits
- Additional insured requirements
- Primary and noncontributory wording
- Waiver of subrogation requirements
- Required duration of completed-operations coverage
Completed operations
Contractors can face claims after work has been finished. If completed-operations coverage is important under the general liability policy, the umbrella should also be reviewed for how it treats those claims.
Pay attention to:
- Completed-operations exclusions
- Residential construction limitations
- Designated project restrictions
- Prior-work provisions
- Subcontracted-work exclusions
- Roofing, height or other trade-specific limitations
Learn more on the Completed Operations page .
Commercial auto and fleet exposure
Vehicle accidents can produce severe bodily injury and property damage claims. Contractors with multiple work trucks, heavy vehicles, trailers or employees driving regularly may need higher limits.
Umbrella underwriters commonly review:
- Number and type of vehicles
- Vehicle weights
- Travel radius
- Driver ages and records
- Employee take-home vehicles
- Towing and trailer use
- Prior commercial auto losses
Workers’ compensation and employers liability
Workers’ compensation policies generally include employers liability coverage. An umbrella may sit over employers liability when it is properly scheduled and satisfies the umbrella’s requirements.
Statutory workers’ compensation benefits are different from employers liability limits. The policy structure should be reviewed rather than assuming an umbrella increases every workers’ compensation benefit.
What an umbrella may not cover
A commercial umbrella does not automatically cover every claim or fill every gap. Depending on the policy, limitations may involve:
- Professional services and design liability
- Pollution conditions
- Employment practices
- Cyber incidents
- Damage to the contractor’s own work
- Property in the contractor’s care, custody or control
- Expected or intended injury
- Contractual liability
- Residential construction
- Specific trades, projects or operations
Higher limits do not remove exclusions. Contractors should review both the amount of insurance and the scope of coverage.
How much umbrella coverage should a contractor carry?
There is no single correct limit for every contractor. The decision may consider:
- Written contract requirements
- Project size and type
- Vehicle and driver exposure
- Payroll and employee count
- Subcontractor use
- Work around the public or occupied property
- Completed-operations exposure
- Business assets and financial capacity
- Claim severity
- Available insurance markets and pricing
Limits should be reviewed as the business grows, adds vehicles, performs larger projects or enters contracts with higher insurance requirements.
What affects umbrella pricing?
Eligibility and pricing may be influenced by:
- Requested umbrella limit
- Contractor trade and operations
- Annual sales, payroll and subcontracted cost
- Underlying policy limits
- Vehicle count, type and radius
- Employee count and workers’ compensation exposure
- Residential and commercial work percentages
- Largest projects
- Prior losses
- Specialized or higher-hazard operations
What to send Ford Agency
Useful information for a commercial umbrella review includes:
- Requested umbrella limit
- Current general liability policy and limits
- Current commercial auto policy and limits
- Current workers’ compensation and employers liability limits
- Detailed operations and work percentages
- Annual sales, payroll and subcontracted cost
- Vehicle and driver summary
- Largest completed, current and anticipated projects
- Residential and commercial work percentages
- Currently valued loss runs when requested
- Complete written insurance requirements