Articles

Umbrella Policy May Provide Primary Coverage

If you have an insurance agent and currently own a home or a business, you probably have considered an umbrella policy.  Umbrella policies fill in gaps in coverage by providing excess coverage and primary coverage.  Excess coverage protects an insured from the possibility of a judgment above the limits of its primary coverage.  Primary coverage, on the other hand, provides coverage for claims either excluded or not covered by the underlying insurance.  In essence, an umbrella policy that provides primary coverage “drops down” and assumes the role of the underlying insurance.

However, to secure coverage under an umbrella policy that provides primary coverage, an insured must still show that the claim is covered under the umbrella policy.  In one case, a car dealership had a garage liability policy that covered “bodily injury” and “property damage” caused by an “accident” and resulting from “garage operations” involving the ownership, maintenance or use of covered “autos.”  The dealership also had a commercial umbrella liability policy.  Individuals injured in an automobile accident involving a car purchased from the dealership filed a declaratory judgment action seeking a determination that coverage existed under both insurance policies.  The court first held that the garage liability policy did not provide coverage since the dealership did not own the vehicle at the time of the accident.  The court then acknowledged that the umbrella policy would serve as primary coverage since coverage was excluded under the garage liability policy.  However, the court noted that coverage still had to be established under the umbrella policy.  Since the plaintiffs failed to provide the court with a cogent argument supporting coverage under the umbrella policy the court held that no coverage existed.