Is There an Umbrella?

Most people would think I am referring to the kind of umbrella that protects you from rain, but today’s discussion is about the kind of “umbrella” or excess liability insurance that provides an additional layer of insurance coverage on top of an underlying policy.  For example, automobile drivers are required under California state law to carry auto liability insurance coverage for their vehicles.  An individual may also purchase an “umbrella” or excess policy that provides an additional layer of liability coverage beyond the coverage limit of the underlying policy.  Homeowners also may choose to purchase an excess liability policy that provides a similar layer of additional coverage over the policy limits of the underlying policy.  In order to qualify for an excess liability coverage policy, the excess insurer normally requires that the policy holder first secure some minimum level of underlying insurance coverage.  A minimum of $500,000 in auto liability coverage may be required before the excess liability insurer will underwrite that umbrella coverage and a minimum of $300,000 in homeowners’ liability coverage before the excess liability insurer will underwrite similar umbrella coverage.  Identifying the existence of an umbrella or excess liability policy is essential when evaluating the extent of a defendant’s (or a plaintiff’s) policy coverage.
Let’s use a current case being handled by Janssen Malloy LLP partner Michael Crowley to illustrate the issue.  Our client was injured in a motorcycle/vehicle collision by a hit and run driver.  After our investigation identified the defendant driver, we filed suit against him, and obtained payment of his auto liability insurance policy limit (which was only $15,000, the absolute minimum a person can drive with in California and be obeying the mandatory insurance requirements).  Our client had an underinsured motorist coverage policy with his own insurance carrier, in the amount of $500,000 (underinsured coverage provides additional coverage beyond that of the inadequately-insured defendant driver).  Our client also had an umbrella or excess liability policy in the amount of $1,000,000, so his full extent of coverage for this incident is $1,500,000.  Our client was driving a motorcycle when the collision occurred, and sustained serious injuries, which required two back surgeries, among other medical interventions.  The case is presently being litigated against our client’s own insurance carrier, which underwrote both the underinsured policy and the excess liability policy.  We have formally demanded that the insurance carrier pay the full benefits of the policies our client paid them to provide.  After all, the premiums were paid to cover exactly the risk that occurred (that he might be injured by an underinsured defendant).  Funnily enough, insurers seem quite open to accepting their insured’s premium payments, but seem to not want to know them when the time comes to pay a claim that the insurance was procured to cover.
Janssen Malloy LLP has encountered numerous instances of cases in litigation in which we discovered late in the process that there was an excess liability policy that applied to the incident, which the insurance carrier involved did not disclose.  These non-disclosures have occurred even after the insurance carrier in question had provided answers to written questions (in legalese, the questions are called “interrogatories”), under oath, asserting that there was only the underlying policy of coverage, had responded to requests for production of documents indicating that no such excess policy existed, and had stated in correspondence from their attorneys that there was no such policy.  In one of our cases, that disclosure of an excess liability policy came after the jury’s verdict.  In another, that disclosure of the excess coverage came after the case had gone through a binding underinsured motorist arbitration proceeding.  Call us skeptical types, but we now look deeper and more persistently into the issue of excess liability coverage, having learned that insurance carriers sometimes do not disclose the full extent of coverage.
The average person usually hasn’t even heard of umbrellas in the context of insurance coverage, and wouldn’t know to ask if such coverage existed or was applicable to their case.  Because it is such a critical piece of information, an injured person needs the expertise of experienced trial counsel who can identify such layers of coverage, engage the coverage, and collect the benefits that the insured paid for with their premium dollar.  If you or your family suffers a serious personal injury, the attorneys at Janssen Malloy LLP stand ready to assist.