Until recently, there was no standard form for personal umbrella liability insurance. Insurance Services Office (ISO) has now developed one, but because companies offering this line have already filed their own forms, ISO will not be filing it on behalf of its member companies. Member companies can, at their option, decide whether or not to adopt the form. Those that do will set their own underlying limits, deductibles, retention amounts, and coverage limits. See Personal Umbrella Policy; and see Auto Personal Umbrella. The articles are on the Packages Personal Zzb- and Zzc- pages respectively.

Because of the optional nature of the new ISO program and the number of programs filed prior to its development, personal umbrella policies are seldom alike, and in fact, there are often considerable differences between one and another.

The discussion that follows describes personal umbrella liability insurance in a general sense. Although an attempt is made to describe the range of different provisions that may be found in a personal umbrella policy, all variations cannot readily be cataloged in a discussion of this scope. Thus, as a rule, these pages describe the usual and typical provisions of personal umbrella policies.

Following this discussion are a number of shorter discussions, each of which details the provisions of a particular insurer's personal umbrella policy. These discussions, arranged in alphabetical order by insurer name, are set up in a uniform numerical format to enable the reader to make point-by-point comparisons between the policies reviewed. Subscribers unfamiliar with personal umbrella liability insurance are advised to read the present discussion before using the articles that follow.

The key protection provided by virtually all personal umbrella policies is $1 million or more, single limit per occurrence, bodily injury-personal injury liability and property damage liability coverages in excess of the insured's underlying coverages, or in excess of the insured's retention (usually $250) when the umbrella policy is broader than the basic policies. Most companies make available higher limits in multiples of the basic $1 million, with some insurers offering up to $10 million (item 1).

All policies provide excess coverage over underlying automobile liability, homeowners liability, and watercraft liability policies. Some policies also offer excess coverage over underlying liability insurance covering certain business pursuits or business property. A very few policies can be written to provide excess coverage over underlying aircraft liability when the aircraft is chartered with crew; although none cover physical damage to the aircraft itself. When written to cover excess uninsured motorists coverage, the umbrella is usually extended over UM coverage only in states where insurers are required by law to offer such coverage.

The type of coverage that an umbrella policy provides when it is broader than the underlying insurance is sometimes referred to as “drop down” coverage. The name derives from the fact that the policy “drops down” to cover the entire loss (minus the retention), instead of merely paying on top of the limits of the underlying insurance. For example, an umbrella policy ordinarily provides coverage for a “personal injury” such as libel or slander even though the underlying insurance covers “bodily injury” only. Typically, the retention is $250.

In addition to the liability limit, most policies also pay for defense of suits that are not payable by the underlying policies, all expenses incurred by the company, all costs taxed against the insured, interest on unpaid judgments, premiums on appeal bonds and release of attachment bonds, and reasonable expenses incurred by the insured at the company's request, usually other than loss of earnings. Some policies also cover loss of earnings up to $100 per day, usually subject to a maximum of $5,000. However, some companies now offer loss of earnings up to $250 per day and some have removed the maximum limit payable for this coverage. Others cover the cost of bail bonds for accidents or traffic law violations. Variations from these supplementary payments are noted in item 11 of the subsequent articles on individual insurance company personal umbrella liability policies.

Typically, a personal umbrella policy covers the insured's liability for “personal injury,” which is defined as bodily injury, sickness, or disease (including death), disability, shock, mental anguish, mental injury, false arrest, false imprisonment, wrongful entry, wrongful detention, malicious prosecution, humiliation, libel, slander, defamation of character, or invasion of the right of privacy. Some policies omit one or more of these items from their definitions, though sometimes without any intended difference in coverage. The drafters of a simplified language policy, for example, may view the terms sickness, disease, disability, or death as being redundant with bodily injury and, accordingly, eliminate the former terms from the definition.

Although found in few umbrella policies, the broadest possible definition of personal injury is the “including but not limited to” type. That is, the definition includes the terms listed above but also states that personal injury is not limited to those terms. Consequently, in a policy using that form of the definition, any kind of personal injury is covered, subject to policy exclusions (and public policy considerations).The personal injury definitions of the insurers surveyed are quoted or paraphrased under item 3 of the subsequent articles on individual insurance company personal umbrella liability policies.

All personal umbrella policies also cover liability for “property damage,” which is usually defined as injury to or destruction of tangible property, including loss of use thereof. Rarely, a policy will provide a measure of protection for damage to intangible property—for example, an organization's loss of goodwill.

Because the umbrella policy is designed to cover the insured's liability to third parties, it was never intended to provide excess uninsured motorists (UM) coverage (a first party coverage). However, some states now require—either by statute or judicial decision—that the insurer offer to extend the personal umbrella over the uninsured motorists portion of an underlying automobile policy. If the insured does not want this coverage, the rejection usually must be in writing.

In every case, a personal umbrella policy states that the persons insured include the named insured and resident relatives. Ordinarily, a policy also includes other residents of the household under the age of 21 who are in the care of the named insured or a resident relative.

It is also quite common for the policy to cover permissive users of automobiles owned or used by the named insured, as well as any person or organization responsible for such persons' use of these automobiles. Similarly, a policy should be checked to see if it covers permissive users of watercraft and recreational vehicles owned or used by the named insured, if those exposures are of potential concern. The policy definitions of “automobile,” “watercraft,” and “recreational vehicle,” if any, are also of obvious importance in determining the extent of coverage that is provided to permissive users. For example, if the policy contains a restrictive definition of “automobile” and permissive users are covered only for the use of “automobiles” as defined, the policy may not cover permissive users in a number of situations.

If the named insured or resident relatives own animals that may incur liability, e.g., a dog, horse, etc., the policy should also be checked to see that it covers other persons who may have custody of such animals. This extension is often provided but is ordinarily worded to exclude kennels, veterinary hospitals, stables, etc.

Automobile and boat businesses, such as service stations, marinas, dealers, and the like, are normally excluded, as are the owners of vehicles rented to or borrowed by the insured.

See item 5 of the subsequent articles on individual insurance policies for a synopsis of the persons insured in each of the policies surveyed. Item 6 discusses the policies' treatment of automobiles and recreational vehicles.

Personal umbrella liability policies differ from each other more in their exclusions than in any other element. And, certainly, the policy exclusions go farther in defining coverage than any other policy section.

An exclusion present in all policies relates to social insurance. There is no coverage of obligations for which the insured may be held liable under any workers compensation, unemployment compensation, disability benefits, or similar law. The exclusion does not eliminate employers liability coverage.

There are several variations in wording of the exclusion of intentional injury. Some companies exclude injuries or damage expected or intended from the point of view of the insured. Others exclude acts committed by or at the direction of the insured with intent to cause injury or damage. Still others are similar to either variation, but with an exception for acts taken for the purpose of preventing or eliminating danger or protecting persons or property. In some policies this exception applies only to personal injury; in others the exception applies to property damage as well. Another approach is for the policy to have no intentional injury exclusion as such, but to define “accident” or “occurrence,” as used in the insuring agreement, as an event not expected or intended by the insured, except for assault and battery committed to save life or property. Some policies also provide an exception for intentional acts performed “to prevent or eliminate danger in the operation of automobiles or boats.” Still others include “aircraft” in that exception. See item 4 of the insurance company personal umbrella policy articles that are elsewhere in this service for the provisions of each insurer respecting intentional injury.

All personal umbrella policies exclude damage to property owned by the insured. From here, there is much variation. Many policies flatly exclude property damage to nonowned aircraft in the care, custody, or control of the insured. Some policies also exclude property damage to nonowned watercraft in the insured's possession. Obviously, the presence or absence of these exclusions can be quite important to the insured who anticipates hiring or borrowing aircraft or watercraft.

While some policies do not have an exclusion of property damage to aircraft in the insured's care, custody, or control, most personal umbrella policies have an exclusion of liability arising out of the ownership, maintenance, use, loading, or unloading of an aircraft. Although that is not precisely the same as an exclusion of property damage to aircraft in the insured's care, custody, or control, it may be construed to have the same effect when the insured's liability for damaging a nonowned airplane in his care, custody, or control results from his maintenance or use of it.

Rarely does a personal umbrella policy flatly exclude damage to property rented to, used by, or in the care of an insured. Apart from the exclusions of aircraft and watercraft damage discussed above, the usual property damage exclusion applies only when the insured has obligated himself (usually under a rental agreement) to provide insurance on property rented or in his care, custody, or control. Normally, this exclusion is applicable regardless of whether the stipulated insurance is actually in effect—the insured's agreement to provide insurance activates the exclusion.

A similar exclusion, easily confused with the preceding one, is found in some policies. It excludes coverage for property damage liability that the insured has assumed under contract or agreement. This exclusion does not depend upon whether the insured has agreed to provide insurance for such damage. The usual interpretation of this type of exclusion is that it applies only to the extent that the insured's liability exceeds that under common law or statute.

The above exclusions might come under consideration when an insured damages a rental car subject to an agreement that the insured will pay for all damage to the car while rented to him, normal wear and tear excepted. Ordinarily, this kind of liability is covered by a primary automobile policy through nonowned physical damage insurance.

So, the question may arise whether any of the above exclusions would prevent a personal umbrella policy from providing coverage in the event the insured does not carry physical damage on his or her own car. Obviously, a flat exclusion of damage to property rented to, used by, or in the care of an insured would eliminate any coverage under the personal umbrella, and the exclusion of liability assumed under contract or agreement would probably be interpreted to the same effect. The exclusion that applies only when the insured has agreed to provide insurance for the property should not apply, however, since an agreement to pay for loss to a rental car is clearly not the same as an agreement to provide insurance for the car. (The latter type of agreement is more likely to be found in a lease than a short-term rental contract.) The provisions respecting nonowned property in the insured's care, custody, or control are described under item 10 of the articles that cover individual insurance company personal umbrella policies.

Treatment of watercraft varies widely. Some policies simply exclude watercraft of 26 feet or more in length. In other policies the exclusion is roughly the same as under standard homeowners liability provisions—inboard or inboard-outdrive watercraft of greater than 50 horsepower, sailing vessels of 26 feet or more, and outboard motorboats with more than 25 total horsepower are excluded. Thus, the personal umbrella covers smaller watercraft, which normally have underlying insurance in the insured's homeowners policy. Usually, the exclusion of larger watercraft is stated not to apply if such watercraft are covered by underlying insurance (and an additional premium is paid) at the inception of the umbrella policy, or unless they are acquired after policy inception and added to the umbrella policy for an additional premium within (typically) thirty or forty-five days.

The exclusion of larger watercraft may apply to owned and rented watercraft, or only to owned watercraft. In the latter case, the insured has coverage for larger watercraft rentals, without having underlying coverage in effect—though the insurance company may stipulate that the coverage applies only for thirty days or some other limited period. See item 7 of the articles on individual insurance company personal umbrella liability policies for each insurer's watercraft provisions.

Currently, most personal umbrellas exclude all liability arising out of the ownership, maintenance, use, loading, or unloading of an aircraft. Exceptions found in some policies relate to aircraft chartered with crew by the insured, and bodily injury to an employee of the insured. Most policies also make an exception for model, toy, or hobby aircraft that do not carry people or cargo. The few policies that provide excess aircraft liability coverage do so through an exception of aircraft to the extent they are covered by an underlying policy described in the umbrella. An underlying limit of $1,000,000 may be required. Aircraft provisions are taken up in item 7 of the subsequent articles on individual insurance company personal umbrella liability policies. As to coverage for property damage to nonowned aircraft rented to or in the care, custody, or control of the insured, see the treatment of care, custody, control, above.

Most personal umbrella policies exclude personal injury and property damage arising out of business pursuits and business property, other than claims involving a private passenger automobile. However, many insurers will cover business pursuits and business property on an excess basis to the extent that an underlying policy does. (For reference, see ISO Home Business Insurance Coverage—Property.) Ordinarily, personal umbrella insurers limit liability coverage for business pursuits and business property to apartment houses, home offices, home studios, and the like.

A policy should always be checked for its definitions of “business,” “business property,” and the like. These terms are often defined not to include (and therefore to insure) automobiles, farms or other premises, part-time business pursuits of relatives under a certain age, etc. These features are described under item 9 of the subsequent articles on individual insurance company personal umbrella liability policies.

All policies contain a professional liability exclusion in the printed form, but some companies will insure certain professional exposures by endorsement, for a significant additional premium. Normally this is on a purely excess basis with no broadening of the underlying coverage. The professional liability option, once quite widely available in personal umbrellas, is currently not offered by most insurers. Item 9 of the subsequent articles on individual insurance company personal umbrella liability policies details each insurer's professional liability exclusion and the existence of any coverage options.

Most personal umbrella policies have an exclusion of liability arising out of the insured's activities as a director or officer of any corporation or association. A common exception to the exclusion preserves coverage for directors and officers of not-for-profit organizations. The absence of a directors and officers exclusion from a policy does not mean that that policy covers the directors and officers exposure; the opinion of many insurance people is that the business pursuits exclusion effectively eliminates coverage for the exposure. The directors and officers exclusion, therefore, might be viewed as a clarification of coverage.

It should also be pointed out that most suits against officers and directors of a corporation are for misuse of funds, malfeasance, or failure to perform some other fiduciary duty. As the umbrella covers only bodily injury, property damage, and personal injury, these items are excluded by definition. This exclusion is included to clarify the situation.

A few insurers exclude any liability arising out of advertising, broadcasting, or telecasting by or for the insured. Like the directors and officers exclusion, this exclusion seems to overlap the business pursuits exclusion. Absence of an advertising exclusion should probably not be interpreted as a statement that the policy covers advertisers liability.

Some policies exclude damages due to discrimination because of race, creed, age, sex, color, or national origin, others exclude discrimination for just some of these reasons, some policies state that they will cover certain types of discrimination if such insurance is permitted by law, and others are silent on the matter. Again, the absence of such an exclusion from a personal umbrella policy should not be interpreted as meaning that the policy covers discrimination. It is problematical whether the usual definition of personal injury encompasses discrimination in the first place, and in many cases an additional obstacle to coverage for claims alleging discrimination is the business pursuits exclusion.

All contracts contain a nuclear energy exclusion, ordinarily in the familiar short form. Some policies exclude one or more of the following exposures: war, motorcycles and recreational vehicles, racing of vehicles and watercraft, and violations of law. All portions of a personal umbrella should be checked carefully in this respect. The absence of a specific exclusion of motorcycles, for example, may be misleading if the persons insured section only provides coverage for motor vehicles with four or more wheels.

Some policies may contain an exclusion of vicarious liability imposed upon parents, for their children's operation or use of automobiles, watercraft, or aircraft. Negligent entrustment by the insured of these items is often excluded as well.

Some personal umbrella policies also contain an exclusion of bodily injury to any insured, thereby precluding coverage for intrafamily suits where such suits are permitted by law. The absence of such an exclusion can be particularly valuable to an insured whose underlying policies contain a similar exclusion. That is, the umbrella policy may provide “drop down” coverage with respect to suits by one insured against another.

An interesting development in 1985 was one insurer's addition of an exclusion of “bodily injury or personal injury resulting from an insured transmitting a communicable disease.” The exclusion was included because of the dramatic increase in the incidence of lawsuits over the transmission of genital herpes and HIV/AIDS. If such lawsuits had been allowed to succeed and become common, the results would have been devastating for insurers without a communicable disease exclusion, especially with regards to suits involving transmission of HIV that later developed into “full-blown” AIDS. Some policies exclude the transmission of any communicable disease. Others limit the exclusion to sexually transmitted diseases. One policy even excludes the transmission of an hereditary disease.

The conditions in personal umbrella liability policies do not vary greatly among insurers. Most are quite similar to the conditions found in standard underlying liability policies and others are specifically tailored for the excess liability arrangement.

One of the most important conditions is the requirement that the insured must maintain the required underlying insurance. If the required underlying coverage is not in force, the umbrella will treat the situation as if the coverage was in force with the insured being responsible for that portion of the loss beneath the attachment point. The umbrella policy will pay no more than it would have paid if the underlying coverage had remained in force.

The insured is required to give the company written notice as soon as practicable of an occurrence likely to involve the company. The insured is also required to furnish copies of legal documents and to assist and cooperate with the company.

The umbrella insurer may elect to participate with the insured and the underlying insurers in the investigation, defense, and settlement of all claims and suits, although it is not responsible for such costs covered by the underlying policies. The company may also elect to appeal a judgment in excess of the underlying or retained limit.

The umbrella policy is excess over any other collectible insurance available to the insured, whether listed in the umbrella policy or not. It contributes only with another umbrella policy.

The subrogation clauses of personal umbrella policies typically state that the insurance company may participate with the insured and the underlying insurers in the insured's right of recovery from liable parties. Recoveries go first to reimburse any interest (including that of the insured) for payments in excess of the umbrella policy limits, second to the umbrella insurer, and third to the underlying insurer.

Thirty days' notice of cancellation is customarily provided.

Available limits vary from $1 million to $10 million in $1 million increments. The available limits for each of the insurers surveyed are listed under item 1 of the subsequent articles on individual insurance company personal umbrella liability policies.

Most companies offer a minimum retention or deductible of $250 per occurrence for claims not covered by underlying policies, except where modified by state law. If an insurer's basic retention is different from the usual $250, it is noted under item 11 of the subsequent articles on individual insurance company personal umbrella liability policies.

Item 2 in the subsequent articles on individual insurance company personal umbrella liability policies shows the variation that exists among the underlying limits required by insurers. Homeowners liability limits ranging from $100,000 to $300,000 and automobile bodily injury and property damage liability limits of $250/500/50,000 (or $500,000 combined single limit) are typical. The underlying limit for “small” watercraft is customarily the same as that of the insured's homeowners liability policy (which covers such watercraft). The usual underlying limit for “large” watercraft—normally those 26 feet or longer in length—may be $300,000 or higher. Underlying aircraft liability limits, where required, vary greatly, but may be as high as a combined single limit of $1 million, including passenger coverage. Underlying limits for recreational vehicles may be the same as those for automobile insurance.

Employers liability underlying limits usually range from $100,000 to $300,000, and underlying liability insurance for business property varies according to the type of coverage offered by the insurer. Some insurers will provide excess coverage over certain classes of commercial liability policies (covering an apartment building, perhaps) in which case underlying limits of $100/300/50,000 or $300/300/50,000 may be required. Other insurers will cover only such incidental business property (studio, office, classroom, etc.) as is covered under a homeowners policy, in which case the insurer's limit requirements for those underlying policies may apply. When the insured has higher than minimum underlying limits, the umbrella policy premium is usually reduced.

There is a drastic difference among carriers in the risk selection phase of the umbrella liability program. Some companies aggressively seek this class of business, whether or not they write the underlying cover. They regard it as a profitable class of business that stands on its own merits and also see it as an entree to writing the whole account. Other companies appear to like to write personal umbrella insurance but are not as aggressive in promoting it. Most umbrella insurers require that the underlying coverages also be written in the same group of companies. One company—although not requiring the underlying coverage—does require the agent to control the underlying business.

Generally speaking, most insurers seem to apply approximately the same individual selection standards to their umbrella program as they do to their basic business. Due to the scope of the umbrella coverage, however, a few additional types of risks may be considered too hazardous: advertisers, writers, radio and television commentators, labor leaders, politicians, celebrities, actors, authors, columnists, athletes, entertainers, and journalists.

There is no standardization in rating procedures, so premiums vary considerably. The most common approach is to start with a basic charge that covers the exposures not insured by underlying policies and that assumes the existence of one residence. Charges for any remaining exposures are added to this. Companies use from one to four rating territories. Credits are usually allowed for higher underlying limits or for higher retentions. Increased limits factors are low. The increased limits factors for one company, for example, are 1.25 (times the $1 million limit premium) for $2 million and 1.50 for $5 million.

In selecting a personal umbrella liability policy, the primary consideration should be that the policy cover as many of the insured's specific exposures as possible. Thus, the umbrella policy should, to the greatest extent possible, be free of exclusions that leave potential sources of liability uninsured. Cost should be of relatively small importance.