Commercial Umbrella — Frequently Asked Questions

A commercial umbrella policy typically sits over your commercial general liability, commercial auto liability, and employers liability (Part B of workers compensation) policies. When a covered claim exceeds the limits of one of these underlying policies, the umbrella pays the excess amount up to its own limit. Most umbrella carriers require minimum underlying limits, usually $1,000,000 per occurrence on general liability and $1,000,000 combined single limit on auto, before they will issue umbrella coverage.

The appropriate umbrella limit depends on your firm's total asset exposure, number of employees, vehicle usage, and client-facing operations. Most small to mid-size law firms carry $2,000,000 to $5,000,000 in umbrella coverage. Larger firms with significant real estate holdings, multiple office locations, or substantial vehicle fleets often carry $10,000,000 or more. Umbrella coverage is relatively inexpensive per million of coverage, making it one of the most cost-effective ways to strengthen your firm's overall liability protection.

No. Commercial umbrella policies do not extend over professional liability or legal malpractice insurance. Umbrella policies are designed to provide excess coverage over general liability, auto liability, and employers liability only. If you need higher malpractice limits, you must purchase them directly through your professional liability carrier or through a separate excess professional liability policy. This is a common misconception that can leave firms dangerously underinsured on their most critical coverage line.

An umbrella policy provides broader coverage than the underlying policies it sits over, potentially covering claims that the underlying policies exclude, subject to a self-insured retention. An excess policy simply extends the limits of a specific underlying policy and follows the same terms, conditions, and exclusions. Umbrella policies offer more comprehensive protection but cost more. For law firms, a true umbrella policy is generally preferred because it can fill gaps between underlying coverages that an excess-only policy would not address.

Umbrella coverage triggers when a covered claim exhausts the applicable underlying policy limit. For example, if your general liability policy has a $1,000,000 per occurrence limit and a slip-and-fall judgment totals $1,800,000, the umbrella pays the $800,000 excess. For claims covered by the umbrella but not by any underlying policy, the umbrella drops down and pays after you satisfy a self-insured retention, typically $10,000. The umbrella does not trigger until the underlying limit is fully exhausted or the retention is met.