One of the biggest problems facing corporate America in today’s business climate is the nuclear verdict, the term applied to a jury trial that awards $10 million or more in damages. Stoked by resentment and anger during the lawsuit and ensuing trial, these substantial verdicts can include disproportionately punitive damages potentially devastating to a company. Umbrella coverage is one way that businesses can use an insurance policy to protect themselves against the threats of nuclear verdicts.
Umbrella Coverage Needed Due to Increased Nuclear Verdicts
Large industries are particularly vulnerable to nuclear verdicts, which appear to show no sign of slowing in the near future. These large verdicts are driven by a variety of factors, including the following:
- Corporate mistrust
- Increased third-party funding for litigation
- Influence of savvy legal advisors
- Legitimate corporate liability
- Lottery mentality
- Misrepresentation of verdicts and settlements
- Social pessimism
What is Commercial Umbrella Insurance?
Also known as excess liability insurance, umbrella policies are available to supplement other existing insurance liability policies. Commercial umbrella coverage is designed for businesses to pick up where the base liability policy stops, providing additional protection for the company. Umbrella coverage can be added to supplement various types of liability insurance policy limits, including the following:
- Commercial auto insurance policies
- Employer’s liability insurance policies
- General liability insurance policies
- Hired or non-owned auto insurance policies
What Does a Commercial Umbrella Policy Cover?
Commercial umbrella policies cover liability claims that rise above the limits of the base insurance policy, including general liability or commercial auto insurance. Umbrella coverage covers medical bills, court costs, property damage, and legal settlements exceeding the base liability limits. Commonly recognized insurance companies can typically provide umbrella insurance policies with limits as high as $10 million. A sophisticated independent agent can obtain even higher limits through specialty insurance brokers, typically in layers of 1, 2 or 5 million dollar increments.
Who Can Benefit From a Commercial Umbrella Policy?
Companies with extensive customer or client interactions are at a higher level of risk for liability claims. The type of business can increase the risk as well. Companies that manufacture a product that could cause harm, is one example. Construction companies erecting buildings or working with heavy equipment are at a higher risk for causing injuries to others. Healthcare industries where patient health is on the line are also considered high risk. Customer-facing companies with people visiting the premises have a higher likelihood of someone alleging a bodily injury than a company that doesn’t have public exposure. These conditions and many more increase the possibility of encountering a nuclear verdict in court with potentially disastrous financial results.
How Nuclear Verdicts Affect the Need For Umbrella Coverage
Nuclear verdicts in U.S. courts have more than tripled since 2015, with the average verdict currently exceeding $214 million. The frequency of verdicts exceeding $20 million has also tripled in the past decade. High jury verdicts that award amounts greatly exceeding what would be considered a reasonable level of damage can potentially bankrupt a company that is not protected by insurance. Businesses should employ risk management approaches like contractual risk transfer strategies, significant umbrella limits and outsourcing certain operations and exposures to mitigate the chance for a significant lawsuit and the potential for a nuclear verdict. In addition to the protection afforded by umbrella coverage, an experienced insurance carrier can assist with resources to help defend the company against liability claims.
Contact a Brooks, Todd & McNeil Agent Today
Our independent insurance agents can help you find the right insurance for all your business needs – including a high limit commercial umbrella policy with the strong relationships enjoyed with the specialty broker network. Our team works for you every step of the way – from reviewing coverage, exclusions and endorsements, to assistance our licensed claim professionals filing claims, we’ve got you covered. To learn more about our products and services, contact us at (800) 448-4567.