The peace of mind liability insurance protection provides, combined with the reasonable cost associated with higher limits, makes excess liability coverage the best value in personal insurance today. It is a vitally impor­tant layer of protection and a critical part of every client review meeting we conduct.

Liability coverage provides protec­tion against a third party. The cover­age is a central part of most personal insurance policies and, most notably, a staple in auto and home insurance poli­cies. Excess liability policies, some­times called umbrella policies, provide limits “in excess” of the limits offered on underlying policies. The liability coverage within a home, auto or water­craft policy is considered the “pri­mary” liability insurance, meaning it responds first in the event of a claim. Excess liability insurance responds after primary limits are exhausted.

HOW MUCH EXCESS LIABILITY COVERAGE DO I NEED?

Only you can determine the appropri­ate amount—however, you do not have to be a billionaire to be sued like one. One measure is to carry limits that are at least equal to your net worth. Most high net worth insurance companies, such as AIG’s Private Client Group, provide excess liability limits up to $100 million. Coverage is available in increments of $1 million to $5 million, and then commonly offered at levels of $10 million, $25 million, $50 million and $100 million. Often, consumers can get $10 million excess liability cov­erage for under $2,500 per year.

Perhaps the greatest benefit associ­ated with excess liability insurance is the defense cost coverage. Most poli­cies pay defense costs outside of your policy limits—an enormous benefit, given how some lawsuits drag on for months or years, accruing large legal bills. Additionally, policies typically include the wording “We will defend an insured person against any suit seeking damages covered by excess liability under this policy. . . even if the allegations of the suit are groundless, false, or fraudulent, we provide this de­fense at our expense.”

WHERE AND WHAT AM I COVERED FOR?

Most excess liability policies provide worldwide protection for personal in­jury (including libel and slander) and property damage, as well as owned and non-owned vehicles, homes and watercraft. Companies like AIG in­clude a “drop-down” feature to elimi­nate potential gaps when covered incidents are excluded from your pri­mary liability policy.

Excess uninsured motorist coverage is also available by endorsement for accidents involving under insured or uninsured drivers. Given that an esti­mated one in six drivers are uninsured, why not provide yourself the same protection you are affording others?

Some Real-Life Examples:

1. Many owners of large estates use golf carts to navigate their properties. A 16-year-old was driving one (insured under her parents’ policy for underlying liability) with a friend to the nearby country club. While traveling at a fairly fast speed, the teen made a sudden left turn and her passenger was ejected from the cart, sustaining a serious head injury. The accident resulted in a seven-figure settlement.

2. A couple hosted a charity auction at their estate. When workers arrived to deliver the items up for bid, they were instructed to move a large item around the side of the house and through the pool area. The wet tile caused one worker to fall, fracture his wrist and fall into the pool, where he almost drowned. He later developed a chronic/progressive neurological disorder. Although the homeowners were not on the property at the time, they were sued and found vicariously liable for their staff member’s actions and the subsequent injuries.


Laura Kearney is an insurance advisor for Private Client Services at Cook Maran & Associates. She works out of Cook Maran’s East Hampton office. Visit the Cook Maran & Associates website.

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