The short version
- What it does: adds limits above general liability, commercial auto, and employers liability, for serious injury and property damage claims that exceed those policies.
- Washington is different. Workers comp comes from L&I, so the employers liability layer an umbrella needs underneath is a separate private stop-gap policy. A missing or mismatched stop-gap can leave employee injury suits outside the umbrella. See the Washington stop-gap gap.
- State auto minimums are low: $25,000 per person in both states. Vehicles are one of the most common reasons businesses need an umbrella. See commercial auto and the umbrella.
- Contracts often require it. General contractors, property managers, landlords, and clients commonly set umbrella limits. See contracts that require an umbrella.
- It is not a catch-all. Umbrellas usually exclude professional liability, cyber, employment practices, pollution, and D&O.
- Owners need both sides coordinated. A personal umbrella often excludes business activities, and a commercial umbrella does not protect your personal assets from personal claims.
How an umbrella fits in a program
| Layer | What it covers |
|---|---|
| Excess layers (optional) | Additional limits above the umbrella |
| Commercial umbrella | Limits above all scheduled underlying policies, and some claims they exclude after a retention |
| General liability | Premises, operations, products and completed operations |
| Commercial auto | Owned, hired, and non-owned vehicles |
| Employers liability | In Washington, stop-gap; in Idaho, Part Two of the workers comp policy |
More on the difference between the two top layers in umbrella vs excess liability.
What a commercial umbrella usually covers and excludes
Detail in what a commercial umbrella covers.
| Usually covered | Usually excluded |
|---|---|
| Bodily injury and property damage above the underlying limits | Professional services |
| Auto accidents above the auto limit | Cyber and data breaches |
| Employee injury lawsuits above employers liability (stop-gap in Washington) | Employment practices (discrimination, harassment, wrongful termination) |
| Personal and advertising injury | Pollution, with limited exceptions |
| Defense costs, often in addition to limits | Directors and officers claims |
| Some claims the underlying policies exclude, after a retention | Workers comp benefits themselves |
Washington and Idaho facts that shape the limit
| Fact | Washington | Idaho |
|---|---|---|
| Minimum auto liability | $25,000 per person, $50,000 per accident, $10,000 property damage (RCW 46.29.090) | $25,000, $50,000, $15,000 (Idaho Code 49-117) |
| Employee injury suits | Generally barred by workers comp, except for deliberate injury (RCW 51.24.020) or when the employer contractually waived immunity (RCW 4.24.115) | Workers comp is the exclusive remedy in most cases |
| Punitive damages | Not allowed without express statutory authorization (Dailey v. North Coast Life, 1996) | Allowed with clear and convincing evidence, capped at the greater of $250,000 or three times compensatory damages (Idaho Code 6-1604) |
| Joint and several liability | Several only, except when the plaintiff is not at fault or the defendants acted in concert (RCW 4.22.070) | Only for parties acting in concert or as agents (Idaho Code 6-803) |
| Comparative fault | Pure comparative fault | A plaintiff whose fault is equal to or greater than the defendant's recovers nothing (Idaho Code 6-801) |
Washington's rule that defendants share joint liability when the plaintiff is not at fault is one reason a business can end up paying more than its own share of a judgment.
How much to buy
Small businesses commonly carry $1 million to $5 million (how to size it; what drives the cost), sized to:
- Vehicles: how many, how heavy, and how far they drive; trucking and fleets need more
- Premises and public contact: customers, tenants, events, and products
- Contracts: the highest limit any client, landlord, or general contractor requires
- What you could lose: business assets and the value of the company itself
Interstate for-hire carriers of general freight in vehicles of 10,001 pounds or more must carry at least $750,000 under federal rules (49 CFR 387.9), and an umbrella often sits on top.
Coordinating with the owner's personal umbrella
| Risk | Personal umbrella | Commercial umbrella |
|---|---|---|
| Business operations and premises | Usually excluded | Covered above the business policies |
| Business-owned vehicles | Often excluded | Covered above commercial auto |
| Rental properties owned in your name | Sometimes, if scheduled | Not unless the properties are in the business |
| Rental properties owned by an LLC | Often excluded | Covered if the LLC is insured |
| A claim naming both you and your company | May leave gaps between policies | May leave gaps between policies |
Trella writes both personal and commercial umbrellas, so the two can be built to fit without overlap or gaps. More in personal vs commercial umbrella, umbrella for rental property and LLCs, and umbrella for contractors. For the personal side, see personal umbrella insurance at Trella Insurance.