Umbrella Liability Coverage for Contractors

What an umbrella does

An umbrella (or excess) liability policy adds limits on top of your general liability, commercial auto and employer's liability. If a serious injury claim exceeds your $1 million GL limit, the umbrella pays the amount above it, up to its own limit. Some umbrellas also broaden coverage; excess policies generally follow the underlying policy's terms exactly.

When contractors need one

• A GC, owner or public agency contract requires $2 million, $5 million or more in total liability.
• Commercial projects, multi-unit residential or work near the public.
• Heavier vehicles or a larger fleet.
• Growth — bigger jobs mean bigger potential claims.

Underlying requirements

Carriers require specific underlying limits before they write an umbrella — commonly $1 million per occurrence on GL, $1 million on auto and $1 million employer's liability on workers' comp. If an underlying policy has an exclusion, the umbrella usually won't cover that gap.

A simple example

A drywall subcontractor's employee leaves a stack of board leaning against a wall; it falls on a homeowner's guest, who is badly injured. The settlement is $1.6 million. With a $1 million GL policy and no umbrella, the contractor owes $600,000 personally or through the business. With a $1 million umbrella over the GL, the umbrella pays the $600,000.

Questions to ask before you buy

• Does it follow form over all three underlying policies — GL, auto and employer's liability?
• Does it include additional insured status for the GC when my GL does?
• Does it drop down if an underlying aggregate is used up?
• Are there exclusions the underlying policies don't have (for example residential, height, or specific operations)?
• Is the limit per occurrence and aggregate, and does defense cost erode it?

What affects the price

• Your trade and the underlying GL class
• Revenue and subcontracted costs
• Vehicles and drivers
• Claims history
• The limit you buy and whether it follows form

Asena Capital Insurance Services compares multiple markets for California contractors and requests additional insured endorsements for you when a contract calls for them. Call (858) 925-9555 or request a quote — only your name, phone and email are required. CA License #6008596.

Frequently asked questions

Is umbrella the same as excess liability?

Close, but not identical. Excess follows the underlying policy's terms; an umbrella can sometimes cover gaps the underlying policy doesn't.

Does an umbrella cover workers' comp claims?

It can sit over the employer's liability part of workers' comp, not over the statutory workers' comp benefits.

How much umbrella coverage should a contractor carry?

Start with the highest limit any contract requires, then consider your largest job and vehicle exposure. $1 million to $5 million is common for small and mid-size contractors.

Can I add an umbrella mid-term?

Usually yes, as long as the underlying policies meet the umbrella carrier's required limits.