Two Stories Of Umbrella Insurance

Apr 21, 2021, 1:28 PM

Despite the jokes, an insurance policy is written in clear language, so you understand what it covers and what it doesn’t cover. What you see is what you get. After all, you’re paying for this valuable protection; you should know what you’re paying for and be able to decide if it’s right for you (with the assistance of your local independent insurance agent). It’s also something that needs to be clear legally, if a court needs to make a ruling about something in an insurance contract.

What an insurance policy isn’t, though, is a place to find creative language. Your policy isn’t a novel or even a short story. A Personal Auto policy applies to the vehicle you personally own, and our Contractors Plus coverage adds on to our basic Selected Contractors coverage.

Maybe this counts as “creative.” A policy that covers really major expenses, that can go with your primary policy (your regular coverage), is known in the industry (and here at Hastings Mutual) as… an umbrella policy. It gives you $1 million or more in coverage, and works with any of our lines of business: commercial, personal, or farm.

What Is Umbrella Coverage?

Here’s a very general look at what umbrella coverage applies to — of course, you should talk to your agent about the details of your specific situation.

• Commercial: It applies to companies like partnerships and traditional corporations.
• Personal: It applies to vehicles like cars, boats, and ATVs.
• Farm: It applies to small farms (maximum of $100,000 in receipts) and country estates.

An umbrella policy is for really big expenses, when the cost goes past your policy’s limit, but there’s still a bill to pay. If you owe a million because of something covered by your insurance, but your policy’s limit is $500,000, you have another $500,000 you need to pay. Since you probably don’t have that much in the bank, it will have to come from somewhere, and that’s the perfect reason to have an umbrella policy.

The umbrella policy does require us to have the policy that the umbrella coverage supports. For example, you can’t buy $2 million in coverage for your personal property if we don’t have a policy for your car.

Here are two situations when an umbrella policy would apply:

Fire On The Job

You own and operate a heating and air conditioning company and are hired to install a new refrigeration system at a local fresh meat market. You are just about done for the day and realize there are a few more copper fittings that need to be connected. Most of your equipment is already back in your truck, but the brazing torch, solder, and flux are still in the bag you are carrying. From your training and experience you know that a fire blanket or cloth should always be used when sweating pipes, especially where there may be combustible material nearby. However, it will only take a couple of minutes to do the work and it would take more time just to go out the truck and grab the fire blanket.

You decide to carefully sweat the connections and check for any fire, smoke, or smoldering. You don’t see anything and feel confident all is well. You put your tools away, come back in to look around one more time and, satisfied there were no issues, head home. Later that night the market burns to the ground.

The cause and origin claim investigator determines the fire started from hot solder drippings that had fallen through a small hole in the floor, eventually igniting a bundle of cleaning rags the owner stored in the basement. You have a $1 million primary policy and a $2 million umbrella. Full value of the claim is determined to be $2.7 million. Your primary policy pays its maximum, $1 million, and your commercial umbrella policy pays the additional $1.7 million.

Dangerous Driving

Your parents are coming to visit and originally told you to pick them up at the airport at 7:00 p.m. It has been raining and overcast all day, so you remind yourself that you need to leave earlier than normal to account for the rain-slick roads. It normally takes 30 minutes to travel to the airport, so you head out to the car at 6:00 p.m. to make the trip.

To your chagrin, one of your kids was working on his motorcycle and has it torn apart in the garage, behind your car. By the time you and he are able to move it out of the way, it is now 6:15 and you are scurrying to the airport. As you back out of the driveway onto the street, it becomes a heavy downpour of rain. You know you need to hurry and also know your car’s tires have about 30% of tread life left on them. So you’re aware you should drive more slowly to avoid hydroplaning.

But you get a text that the airplane landed early and your parents are waiting. You increase your speed and, as you are going around a curve, hit a patch of water over the road, hydroplane, and lose control, traveling across the center line. Your car slams into the driver’s side of an oncoming vehicle.

The driver of the vehicle is pronounced dead at the scene and the front seat passenger is transported to the hospital with critical, but not life-threatening, injuries. The full value of the decedent’s claim is determined to be $1.1 million and the passenger’s claim is $450,000.

Your primary auto policy has a $500,000 per-person and $1 million per-occurrence limit.  You have a $1 million umbrella. Your primary limit of $500,000 is paid to the decedent’s estate and the remaining $600,000 of the estate’s claim is paid under the umbrella. Because the passenger’s claim did not exceed the $500,000 per-person limit, that claim was entirely paid under the primary policy.

Questions? Let us know in the comments.

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