What happens when your building design business causes a very serious accident or major third-party property damage? You may already have three liability insurance policies—general liability, commercial auto, and employer’s liability—that will cover you for some of the risk, but what if the damages you are responsible for exceed the limits of those policies? That’s where Commercial Umbrella Insurance comes in to provide an additional safety net for your building design business.

What is Commercial Umbrella Insurance for building design professionals?

Commercial Umbrella Insurance is a type of insurance that covers your building design business in the event your business causes losses or damage that exceed your general liability, commercial auto, or employer’s liability insurance limits.

What does Commercial Umbrella Insurance for building design professionals cover?

As a building design firm, are you prepared for liability claims and lawsuits that may exhaust the limits of your primary liability policies? You may be an architectural firm with clients in multiple states. Your architects and salespeople spend countless hours driving to client offices and building sites, putting your company at higher risk for accidents on the road. You may be a building design firm that also supervises the construction of buildings, meaning that your employees will be exposed to more danger on the construction site and more employer’s liability claims. Umbrella Insurance serves as a backup to the existing limits of liability policies. If your underlying coverage is ever exhausted due to a large settlement or multiple claims in a policy year, then the Umbrella Policy will cover the rest, up to the coverage limit for the Umbrella Policy.

Umbrella Insurance will provide additional coverage if you have exceeded the limits for three key insurance policies:

• General liability insurance
• Commercial auto liability insurance
• Employers’ liability insurance

Examples:

• Your design build firm is supervising and managing the construction of a major overpass when a piece of concrete falls on a passerby walking underneath it. After he gets injured, he sues for $2 million but your general liability insurance has a limit of $1 million. Your Commercial Umbrella Insurance covers the rest.
• One of your architects is rushing to a client meeting in a company car when he runs a red light and hits another vehicle. The other driver is severely injured in the accident and needs several operations. He sues your firm for his medical expenses, pain, and suffering and wins a judgment of $2.5 million. Your commercial auto liability insurance pays out the policy limit of $1 million while your Commercial Umbrella Insurance pays the remaining $1.5 million.
• Your civil engineering firm purchases employers’ liability insurance with policy limits set at $1 million, and a Commercial Umbrella Insurance policy to cover an additional $2 million for liability. One of your engineers suffers a fatal fall off a structure that is under construction while he is going over specifications. His wife files a loss of consortium lawsuit for the loss of companionship and wins a $1.5 million settlement. Your employers’ liability insurance will pay out the policy limit of $1 million while your Commercial Umbrella Insurance will cover the remaining $500,000.

Commercial Umbrella Insurance is typically not sold as a standalone policy. Once you purchase general liability insurance, commercial auto insurance, or employer’s liability insurance, you can then purchase Commercial Umbrella Insurance to provide additional coverage beyond the policy limits of these primary lines. You may be required by insurers to purchase a minimum amount of underlying liability insurance before you can purchase Commercial Umbrella Insurance, e.g. $1 million for general liability and $1 million for commercial auto liability.

Why might building design professionals need Commercial Umbrella Insurance?

• Your firm has high-risk exposures. For example, you are a design build firm that manages the design and construction of buildings. Your firm oversees hazardous construction sites where employee injuries and third-party property damage are more likely.
• Your building design firm owns substantial assets that you wish to protect in the event of a lawsuit.
• You have high net worth clients. For example, your architectural firm is designing a signature home for a multimillionaire. If he comes into your office to meet with an architect and trips over an errant power cable and sustains an injury that prevents him from working for months, he could sue you for his lost income.
• Your business is more likely to have general liability, commercial auto liability, and employer’s liability claims. For example, your interior design firm is based out of an office in San Francisco but your designers drive to locations all over Northern California to work on client homes and offices. You might be at higher risk of commercial auto liability claims.
• Your clients require higher liability limits than your primary liability policies provide and you need to meet contractual obligations.
• Your building design firm does not have a lot of capital. In the case of an extremely high-dollar claim or lawsuit, you will be financially vulnerable.

What are the key exclusions of Commercial Umbrella Insurance for building design professionals?

Commercial Umbrella Insurance does not provide an additional layer of coverage for all types of claims, despite popular misconceptions. Major types of insurance coverage that can’t be backed up with Commercial Umbrella Insurance:

Commercial property insurance – Commercial Umbrella Insurance generally does not cover claims related to property damage, unless it’s third-party property damage relating to general liability.

• Example: The offices of your engineering firm are hit by a tornado, resulting in property damage of $1 million. Since you did not have the option to purchase Commercial Umbrella Insurance to provide extra coverage for property claims, your business can only recoup losses up to the policy limit of your property insurance policy.

Professional liability insurance – Commercial Umbrella Insurance generally does not cover professional liability claims and lawsuits.

• Example: Your architecture firm is hired for a new office building project. After a technical error in the blueprint is discovered during the construction phase of the project, the structure must be demolished and rebuilt. The project owner sues your firm for $2 million worth of financial losses, which exceeds the limits of your professional liability insurance. Unfortunately, your Commercial Umbrella Insurance will not cover the excess losses.

How much Commercial Umbrella Insurance do I need?

Every business has different levels of risk exposure, but most small businesses will find a $1 million per occurrence and $2 million aggregate limit adequate.

How much does Commercial Umbrella Insurance for building design professionals cost?

Premiums will be calculated based on the nature of your business, risk exposures, and the amount of coverage you want. Commercial Umbrella Insurance does provide a high dollar amount of coverage for a relatively inexpensive premium (typically between $750 and $1,500 for small business owners). Many business owners find purchasing Commercial Umbrella Insurance to be a more attractive option than simply paying more to raise the limits of their general liability, commercial auto liability, and employer’s liability insurance policies.

What is the “duty to defend” for Commercial Umbrella Insurance?

Most liability policies require insurers to defend the policyholder against lawsuits. Under many Commercial Umbrella Insurance policies, insurers do not have this “duty to defend.” Sometimes it may be required of the insurer, but other times the “duty to defend” is limited or non-existent.

For example, let’s say a civil engineering firm has exhausted the policy limit for its employers’ liability insurance paying out claims to a civil engineer injured on a job site. When another engineer files a lawsuit against the firm in the same year, the employers’ liability insurance has maxed out its policy limit and will not cover expenses related to the lawsuit. Will the Commercial Umbrella Insurance policy step in to cover the defense costs of the lawsuit? Only if the particular Umbrella policy requires it.

Final Word

If you are running a building design business with frequent interaction with clients, vendors, and partners, and sometimes hazardous work (e.g., architects and engineers at building sites), are you prepared for serious incidents that may exhaust the limits of your liability policies? If your building design business face claims and lawsuits more costly than your primary liability policies can shoulder, Commercial Umbrella Insurance can provide an additional safety net. With high-dollar claims and lawsuits becoming increasingly common, Commercial Umbrella insurance is an additional policy that can provide peace of mind for your business.