What does a commercial umbrella policy cover for a law firm?

A commercial umbrella policy is a critical component of a comprehensive law firm insurance program. The umbrella provides excess limits that kick in when the underlying primary policy limits are exhausted, effectively extending your coverage for catastrophic claims that exceed primary policy limits. For a law firm, the umbrella typically sits above the general liability, commercial auto, and employer's liability portions of the workers compensation policy.

The umbrella serves two functions. First, it provides additional limits above the underlying policies. If your general liability policy has a $1 million per-occurrence limit and someone suffers a serious injury on your premises resulting in a $2.5 million judgment, the umbrella pays the $1.5 million excess after the primary policy pays its $1 million limit. Second, many umbrella policies provide broader coverage than the underlying policies, covering certain claims that the primary policies exclude, subject to a self-insured retention.

For law firms, the most important consideration is whether the umbrella extends over professional liability coverage. Not all commercial umbrellas include professional liability in the schedule of underlying insurance. If your umbrella does not sit excess over your malpractice policy, you have additional limits for premises liability and auto claims but not for the most significant exposure your firm faces. Confirm this with your broker and, if necessary, seek a specialty umbrella or excess professional liability policy that provides additional malpractice limits.

Umbrella premiums for law firms are relatively affordable, often $1,500 to $5,000 annually for $1 million in additional limits. Higher umbrella limits of $2 million to $5 million are available at incrementally higher premiums. Given that a single catastrophic claim can threaten the firm's financial survival, the cost of umbrella coverage represents excellent value relative to the protection it provides.