Part 3 – Maintenance of Underlying Insurance, Duties After Loss, and General Provisions

Topics covered:

Coverages

Exclusions

Coverages

A. Insuring Agreement
We will pay damages, in excess of the "retained limit," for:
1. "Bodily injury" or "property damage" for which an "insured" becomes legally liable due to an "occurrence" to which this insurance applies; and
2. "Personal injury" for which an "insured" becomes legally liable due to one or more offenses listed under the definition of "personal injury" to which this insurance applies
Damages include prejudgment interest awarded against an "insured."

Analysis

Here, the insurer agrees to pay damages in excess of the retained limit for a covered loss. For example, if an insured is sued because of a covered auto accident and carries $300,000 underlying bodily injury/property damage limits, and a $250 umbrella deductible, the umbrella will respond when the suit claims over $300,250 in damages.

The umbrella will respond to losses due to bodily injury, property damage, and personal injury that the insured is legally liable for. Bodily injury and property damage are covered under the underlying homeowners or personal auto policy, but the umbrella is able to provide greater limits for those coverages.

Personal injury coverage is also provided, which is a strong reason to purchase an umbrella policy, since it is not available on the underlying homeowners form or personal auto policy without an endorsement. Personal injury includes libel and slander, false arrest, malicious prosecution, wrongful eviction or wrongful entry into a private room, dwelling, or premises committed by or on behalf of its owner, landlord, or lessor.

The umbrella also covers any prejudgment interest, which is any interest accrued on the amount of damages claimed if there is a judgment against the insured.

B. Defense Coverage
1. If a claim is made or a suit is brought against an "insured" for damages because of "bodily injury" or "property damage" caused by an "occurrence" or "personal injury" caused by an offense to which this policy applies, we:
a. Will provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. However, we are not obligated to defend any suit or settle any claim if:
(1) The "occurrence" or offense is covered by other "underlying insurance" available to the "insured"; or
(2) There is no applicable "underlying insurance" in effect at the time of the "occurrence" or offense and the amount of damages claimed or incurred is less than the applicable deductible amount shown in the Declarations.
b. May join, at our expense, with the "insured" or any insurer providing "underlying insurance" in the investigation, defense or settlement of any claim or suit which we believe may require payment under this policy.
However, we will not contribute to the costs and expenses incurred by any insurer providing "underlying insurance"; and
c. Will pay any expense incurred for the "insured's" defense, with our written consent, in any country where we are prevented from defending an "insured because of laws or other reasons.
2. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when our limit of liability for the "occurrence" or offense has been exhausted by payment of judgments or settlements.

Analysis

The insurer has the duty to defend a claim made against an insured even if the suit is groundless, false, or fraudulent. The insurer's duty to defend is broader than its duty to indemnify, so if the claim falls within the scope of coverage, it must provide a defense, at their own expense.

However, the umbrella insurer is not obligated to provide a defense if the retained limit has not been met. If the occurrence is covered by underlying insurance, or if there is no underlying insurance, but the amount claimed is less than the deductible shown on the umbrella insurer's Declarations page, the insurer has no duty to defend. If the limit has not been met, the underlying insurer provides the defense.

The umbrella insurer may join the underlying insurer in the investigation or defense of a claim if they believe they may have to pay. The umbrella will pay for a defense "in any country," highlighting that there is worldwide coverage. The insurer has the right to settle any claim or suit at its discretion, regardless of whether the insured agrees.

C. Additional Coverages

We will pay:
1. Expenses we incur and costs taxed against an "insured" in any suit we defend;
2. Premiums on bonds required in a suit we defend, but not for bond amounts to the extent   they exceed our limit of liability. We need not apply for or furnish any bond; and
3. Reasonable expenses incurred by an "insured" at our request, including actual loss of earnings (but not loss of other income) up to $250 per day, for assisting us in the investigation or defense of a claim or suit; and
4. Interest on our share of the judgment which accrues after entry of the judgment and before we pay or tender, or deposit in court, that part of the judgment which does not exceed the limit of liability that applies.
These payments will not reduce the limit of liability.

D. Limit of Liability
Our total liability under this policy for all damages resulting from any one "occurrence" or offense will not be more than the limit of liability as shown in the Declarations of this policy. This limit is the most we will pay regardless of the number of "insureds," claims made, persons injured, or vehicles involved in an accident.

Analysis

The umbrella provides four additional coverages. These are expenses incurred by the insurer, including any taxes imposed against the insured in a suit defended by the insurer; premiums on bonds in a defended suit, unless they exceed the limit of liability; reasonable expenses incurred by an insured at the insurer's request, including loss of earnings up to $250 per day; and interest on any settlement that accrued after entry of the judgment order but before payment is actually made. These coverages do not reduce the limit of liability; they are paid in addition to the limit.

The limit of liability section makes it clear that the most the insurer will pay for any one occurrence is the limit shown in the Declarations, regardless of the number of insureds, claims made, persons injured, or vehicles involved in an accident.

Exclusions

A.The coverages provided by this policy do not apply to:
1."Bodily injury" or "property damage" which is expected or intended by an "insured" even if the resulting "bodily injury" or "property damage":
a.Is of a different kind, quality or degree than initially expected or intended; or
b.Is sustained by a different person, entity, or property than initially expected or intended.
However, this exclusion (A.1.) does not apply to:
(1) "Bodily injury" or "property damage" resulting from the use of reasonable force by an "insured" to protect persons or property; or
(2) "Bodily injury" or "property damage resulting from the use of reasonable    force by an "insured" to prevent or eliminate danger in the operation of      "autos," "recreational motor vehicles" or watercraft.

Analysis

The first exclusion is for expected or intended injury by an insured. If an insured gets into a fist fight with a neighbor and injures him, those injuries would not be covered. Likewise, if the insured tears down a neighbor's ugly shed without permission, that is also not covered.

There is no coverage for intentionally inflicted injury or property damage even if the injury or property damage is not that which was initially expected or intended, or happens to a different person other than the intended victim. If an insured intends to punch someone but instead hits another person, there is still no coverage. If an insured intends to injure a person, but the person dies, there is no coverage even though the insured did not intend for the death to occur.

There are exceptions to the exclusion for intentional bodily injury or property damage resulting from the use of reasonable force to protect persons or property, and the use of reasonable force to prevent danger while operating autos, recreational motor vehicles, or watercraft.

If the insured damages property in an attempt to protect persons or property, damage to that property is covered as well. For example, if an insured intentionally fired a gun, inflicting bodily injury upon a burglar, and hit the neighbor's garage, the umbrella would provide coverage for both the injury and the property damage. There is coverage as well if an insured acts to prevent or eliminate danger in the operation of motor vehicles, watercraft, or recreational vehicles. For example, if an insured takes the wheel from a driver who has lost control of an auto, but runs the auto into a wall with resulting injuries to passengers or bystanders, there is coverage. The act was intentional but was taken to prevent the danger posed by the out-of-control driver.

2."Personal injury":
a. Caused by or at the direction of an "insured" with the knowledge that the act would violate the rights of another and would inflict "personal injury";
b. Arising out of oral or written publication of material, if done by or at the direction of an "insured" with knowledge of its falsity;
c. Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;
d. Arising out of a criminal act committed by or at the direction of an "insured"; or
e. Sustained by any person as a result of an offense directly or indirectly related to the employment of this person by an insured.

Analysis

Exclusion 2 limits the extent of personal injury coverage provided by the policy. Personal injury includes libel and slander, false arrest, malicious prosecution, wrongful eviction or wrongful entry into a private room, dwelling, or premises committed by or on behalf of its owner, landlord, or lessor.
However, the policy does not cover personal injury caused by an insured who knows that their action violates the rights of another. Libel or slander if the insured knows that the libel or slander is false is also not covered, in addition to any libel or
slander that were published prior to the policy's inception. Any criminal act committed by or at the direction of the insured is not covered. Finally, there is no coverage for any offense against an employee of the insured. Any employee of an insured filing a lawsuit against the insured would not be covered by the umbrella.

3. "Bodily injury," "personal injury" or "property damage" arising out of or in connection with a "business":
a. Engaged in by an "insured."; or
b. Conducted from:
(1) Any part of a premises owned by or rented to an "insured"; or
(2) Vacant land owned by or rented to an "insured".
This exclusion (A.3.) applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the "business."
However, with respect to other than "home-sharing host activities", this exclusion (A.3.) does not apply to:
(a) The rental or holding for rental of:
(i.) The residence premises shown in the Declarations:
(i.) On an occasional basis if used only as a residence;
(ii.) In part, for use only as a residence, unless a single-family unit is   intended for use by the occupying family to lodge more than two     roomers or boarders; or
(iii.) In part, as an office, school, studio or private garage;
(ii) Any part of a one to four family dwelling other than the residence                   premises to the extent that personal liability coverage is provided by                            "underlying insurance"; or
(iii) A condominium, cooperative, or apartment unit other than the residence                 premises to the extent that personal liability coverage is provided by                  "underlying insurance";
(b) Civic or public activities performed by an "insured" without compensation other than reimbursement of expenses;
(c) An "insured" minor involved in self-employed "business" pursuits, which are occasional or part-time and customarily undertaken on that basis by minors. A minor means a person who has not attained their:
(i) 18th birthday; or
(ii) 21st birthday if a full-time student;
(d) The use of an "auto" you own, or a temporary substitute for such "auto, by you, a "family member" or a partner, agent or employee of you or a "family member" while employed or otherwise engaged in the "business" of:
(i) Selling;
(ii) Repairing;
(iii) Servicing;
(iv) Storing; or
(v) Parking;
vehicles designed for use mainly on public highways;
(e). The use of an "auto" for "business" purposes, other than an auto business, by an "insured."

Analysis

The next exclusion is for business exposures; the personal umbrella form is for personal protection and not designed for commercial exposures. However, there are some exceptions to the exclusion.

Excepted from the exclusion is the rental or holding for rental of the residence premises if it is only rented occasionally, if part of the premises is rented for use as a residence, or if part of the premises is rented as an office, school, studio, or private garage.

Also excepted are the civic or public activities performed by an insured as long as the insured performs the activities without monetary compensation other than reimbursement of expenses.

There is coverage for an insured minor's part-time or occasional self-employed business pursuits, such as babysitting, lawnmowing, etc. A minor is defined as a person who is not yet 18 years old or not yet 21 if they are a full-time student. If the insured's activities receive more than $5,000 in a 12-month period, then it would be considered a business, and the exclusion would apply.

Finally, there is coverage for an insured's use of an auto for business purposes, other than an auto business. So if an insured drives his car to work every day, as long as he is not engaged in an auto business, there would be coverage if he got into an accident.

4."Bodily injury" or "property damage" arising out of the ownership or operation of an "auto" while it is being used as a public or livery conveyance. This includes, but is not limited to, any period of time an "auto" is being used by any "insured" who is logged into a:
a. "Transportation network platform" as a driver, whether or not a passenger is occupying the "auto".
b. "Transportation network platform" or "delivery network platform" as a driver to provide        delivery services, including courier services, whether or not the food, goods, items or    products to be delivered are in the "auto".
This Exclusion (A.4.) does not apply to
(1) A share-the-expense car pool; or
(2) The ownership or operation of an "auto" while it is being used for volunteer or charitable purposes;

5. "Bodily injury" or "property damage" arising out of the ownership, maintenance or use of an "auto" while:
a. Enrolled in a personal vehicle sharing program under the terms of a written agreement; and
b. Being used in connection with such personal vehicle sharing program by anyone other than you or any "family member";

Analysis

Exclusion 4 addresses the gig economy apps such as Uber, Lyft, DoorDash, and Uber Eats. These are commercial exposures and not befitting for a personal umbrella policy. There is no coverage while an insured is logged into any of these types of apps, including the time when a passenger, or food or goods to be delivered are not even in the vehicle. So if an Uber driver accepts a customer through the app and on the way to pick up the customer and gets into an accident, there is no coverage even though the passenger was not occupying the vehicle.

This exclusion does not apply to the use of the auto for volunteer or charitable activities, nor for a share-the-expense carpool.

Exclusion 5 is similar, but addresses vehicle sharing services, such as Turo. If an insured enrolls their auto in a vehicle-sharing program, there is no coverage for damage resulting from that. The umbrella is not designed to take on the risk of strangers using the insured's vehicle.

6. "Bodily injury", "personal injury" or "property damage" arising out of the rendering of or failure to render professional services;

7. "Aircraft Liability";

8. "Hovercraft Liability";

9. "Watercraft Liability".
However, this Exclusion (A.9) does not apply to the extent that watercraft coverage is provided by "underlying insurance" at the time of the "occurrence";

10."Recreational Motor Vehicle Liability".
However, this Exclusion (A.10.) does not apply with respect to any "recreational motor vehicle":
a. Owned by you or a "family member" to the extent that "recreational motor vehicle" coverage is provided by "underlying insurance" at the time of the "occurrence"; or
b. That you or a "family member" does not own;

Analysis

There is no coverage for bodily injury, property damage, or personal injury arising out of performing or failing to perform professional services. Coverage for these activities is properly found elsewhere, such as under an errors and omissions or medical malpractice policy.

There is no coverage under the umbrella for any bodily injury or property damage for the ownership, operation, use, or any action, including entrustment or vicarious liability for the actions of a child or minor, in connection with any aircraft, hovercraft, watercraft, or recreational motor vehicle. These exposures should be insured elsewhere.

There is an exception for watercraft liability to the extent that watercraft coverage is provided by underlying insurance. There are also exceptions for recreational motor vehicle liability to the extent that coverage is provided by underlying insurance when the vehicle is owned by the insured or a family member, or to a recreational motor vehicle that is not owned by the insured or a family member. If an insured uses a friend's snowmobile and crashes into a house, the umbrella would respond.

11. "Bodily injury" or property damage" caused directly or indirectly by war, including the following and any consequence of any of the following:
a. Undeclared war, civil war, insurrection, rebellion or revolution;
b. Warlike act by a military force or military personnel; or
c. Destruction, seizure or use for a military purpose.
Discharge of a nuclear weapon will be deemed a warlike act even if accidental;

12. A person using an "auto," "recreational motor vehicle" or watercraft without a reasonable belief that that person is entitled to do so. This Exclusion (A.12.) does not apply to a "family member" using an "auto," "recreational motor vehicle" or watercraft you own;

13. The ownership, maintenance or use of:
a. Any "auto" for the purpose of:
(1) Participating or competing in; or
(2) Practicing or preparing for;
any prearranged or organized:
(a) Racing or speed contest; or
(b) Driver skill training or driver skill event; and
b. Any watercraft which, at the time of the "occurrence", is:
(1) Being operated in; or
(2) Practicing or preparing for;
any prearranged or organized:
(a) Race;
(b) Stunt activity;
(c) Speed contest; or
(d) Other competition.
However, this exclusion (A.13.) does not apply to:
(i) Motorcycle rider skill training in connection with a course designed by the Motorcycle Safety Foundation, or any similar course administered by any state agency, to improve motorcycle rider skills;
(ii) A sailing vessel; or
(iii) Watercraft involved in predicted log cruises;

Analysis

The umbrella contains the commonly found war exclusion. War includes undeclared war, civil war, insurrection, rebellion, revolution, warlike acts by a military force or military personnel, or the destruction, seizure or use for a military purpose. The discharge of a nuclear weapon is also excluded, even if it was accidental.

Exclusion 12 bars coverage for a person using an auto, watercraft, or recreational motor vehicle without a reasonable belief they are entitled to do so.There is an exception for a family member using such a vehicle if they are owned by the insured. If the insured's teenage son takes the family car keys from his mother's handbag without first asking, there is coverage.

Exclusion 13 is for racing. The ownership, maintenance, or use of any auto participating or practicing for a prearranged or organized race, speed contest, or similar competition is excluded. Any watercraft is also excluded for a prearranged or organized race, stunt activity, speed contest, or similar competition.

Exceptions to the exclusion include motorcycle rider skill training in connection with a course designed by the Motorcycle Safety Foundation, or similar course, that is administered by a state agency with the goal being to improve motorcycle rider skills, sailing vessels, and watercraft participating in predicted log cruises. A predicted log cruise is a precision competition and not a speed contest.

14. "Bodily injury" or "personal injury" to you or any "family member"; This exclusion also applies to any claim made or suit brought:
a. To repay; or
b. Share damages with;
another person who may be obligated to pay damages because of "bodily injury" or "personal injury" to you or a "family member";

15. "Bodily injury", "personal injury" or "property damage" arising out of:
a. The actual or alleged transmission of a communicable disease by an "insured";
b. The actual, alleged or threatened abuse or molestation, including, but not limited to, sexual abuse or sexual molestation, corporal punishment or physical or mental abuse, of any person committed by anyone; or
c. The use, sale, manufacture, delivery, transfer or possession by any person of:
(1) A Controlled Substance(s) as defined by the Federal Food and Drug Law at 21 U.S.C.A. Sections 811 and 812; or
(2) Any "cannabis" regardless of whether such "cannabis" is considered a Controlled Substance.
Controlled Substances include but are not limited to cocaine, LSD, and all narcotic drugs.
However, this exclusion (A.15.c.) does not apply to the legitimate use of prescription drugs by a person following the lawful orders of a licensed health care professional;

16. "Bodily injury," "personal injury" or "property damage" arising out of an act or omission of an "insured" as an officer or member of a board of directors of a corporation or organization. However, this exclusion (A.16.) does not apply if the corporation or organization is not-for-profit and the "insured" receives no compensation other than reimbursement of expenses;

17. "Property damage" to property owned by an "insured". This includes costs or expenses incurred by an "insured" or others to repair, replace, enhance, restore or maintain such property to prevent injury to a person or damage to property
of others, whether on or away from the residence premises shown in the Declarations;

Analysis

Exclusion 14 precludes coverage for bodily injury or personal injury to the insured or a family member, while exclusion 17 precludes coverage for property damage to property owned by the insured. These are anti-collusion measures; an insured cannot be held liable against another insured. An umbrella provides coverage for liability against third parties, not against another insured.

Exclusion 15 excludes coverage for bodily injury, personal injury, or property damage arising out of the transmission of communicable diseases, and the actual or alleged abuse or molestation, including sexual molestation, corporal punishment, or physical or mental abuse of any person. The 2026 update of the form added property damage to the exclusion.

The use, sale, manufacture, delivery, transfer, or possession of controlled substances and cannabis is also excluded. Controlled substances are determined based on what is defined by the Federal Food and Drug law.

The 2026 revision added cannabis to the exclusion, so it is excluded regardless of whether it is listed as a controlled substance or not, and regardless of whether its use has been legalized by any specific state. The use of prescription drugs by a person following the direction of a licensed health care professional is excepted from the exclusion.

Exclusion 16 excludes coverage for the act or omission of an insured while serving as an officer or member of a board of directors of a corporation or organization. This type of coverage should be provided by another policy. The exclusion does not apply if the corporation is not-for-profit and if the insured receives no compensation other than the reimbursement of expenses.

18. "Property damage" to property rented to, occupied or used by, or in the care, custody or control of, an "insured" to the extent that the "insured" is obligated by contract to provide insurance for such property. However, this exclusion (A.18.) does not apply to "property damage" caused by fire, smoke or explosion;

19."Bodily injury" to any person eligible to receive any benefits:
a.Voluntarily provided; or
b.Required to be provided;
by an "insured" under any:
(1)Workers compensation law;
(2)Non-occupational disability law; or
(3) Occupational Disease law;

20. "Bodily injury" or "property damage" for which an "insured" under this policy:
a. Is also an insured under a nuclear energy liability policy issued by the:
(1) Nuclear Energy Liability Insurance Association;
(2) Mutual Atomic Energy Liability Underwriters; or
(3) Nuclear Insurance Association of Canada;
or any of their successors; or
b. Would be an insured under that policy but for the exhaustion of its limit of liability;

21. "Bodily injury," "personal injury" or "property damage" caused by an "occurrence" or offense involving the escape of fuel from a "fuel system";

22. "Bodily injury" or "personal injury" caused by an "occurrence" or offense involving the absorption, ingestion or inhalation of lead;

23. "Personal injury" or "property damage" caused by an "occurrence" or offense of lead contamination.

Analysis

Exclusion 18 precludes coverage for property damage to property rented to, occupied, or used by, or in the care, custody, or control of an insured, if the insured is required by contract to provide insurance for the property.

If the insured rents a car and the rental agreement requires the insured to have insurance on the car, the umbrella would pay for property damage to the car if there were an accident. The exclusion is for property damage to the rented or occupied property; the umbrella may still respond to bodily injury or property damage to other property that the insured is liable for.

The exclusion does not apply if the property damage is caused by fire, smoke, or explosion.
Exclusion 19 precludes coverage for bodily injury for any person eligible to receive benefits, whether mandated or voluntarily provided, by an insured under workers' compensation law, nonoccupational disability law, or occupational
disease law.

Exclusion 20 precludes coverage for bodily injury or property damage to an insured when the insured is also an insured under a nuclear energy policy. This includes a policy issued by the Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters, or the Nuclear Insurance Association of Canada, or any of their successors.

Exclusion 21 precludes coverage for bodily injury, personal injury, or property damage caused by an occurrence involving the escape of fuel from a fuel system. As discussed in the previous article, the homeowners form covers liability for the escape of liquid fuel up to the policy limits, and if endorsement HO 05 80 03 22 Property Remediation for Escaped Liquid Fuel and Limited Lead and Escaped Liquid Fuel Liability coverages is attached, the limit can be increased in the endorsement's schedule. However, while the homeowners form provides coverage, the umbrella form totally excludes liability from the escape of fuel from a fuel system.

The final two exclusions preclude coverage for injury caused by an occurrence or offense involving the absorption, ingestion, or inhalation of lead, or caused by lead contamination. Endorsement HO 05 80 03 22 can also be used to provide limited lead coverage on the homeowners policy, but like the fuel system exclusion, no such coverage is available on the umbrella form.

B. Liability coverage does not apply to any loss assessment charged against you as a member of an association, corporation or community of property owners.

C. We do not provide:
1. Automobile no-fault or any similar coverage under this policy; or
2. Uninsured Motorists Coverage, Underinsured Motorists Coverage, or any similar coverage unless this policy is endorsed to provide such coverage.

Analysis

There is no coverage under the umbrella for any assessment charged against the insured as a member of an association, corporation, or community of property owners. The homeowners form provides up to $2,000 as additional coverage.
Finally, the umbrella makes it clear that there is no automobile no-fault, uninsured, or underinsured motorist coverage provided unless the policy is endorsed to provide it. Several states require that uninsured/underinsured motorist coverage be offered on an umbrella policy, so endorsements are available to provide the coverage. It may be wise to opt for the coverage even if not required, to better protect the insureds.

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