Commercial Umbrella Policy (CUP)
Your go-to resource for understanding how Commercial Umbrella coverage provides an extra layer of protection — and how Merchants helps safeguard businesses facing higher liability risks across multiple operations.
Commercial Umbrella Coverage
The Commercial Umbrella policy provides the following coverage:
Bodily Injury and Property Damage Liability (Coverage A)
The policy pays on behalf of the insured the ultimate net loss in excess of the “retained limit” because of bodily injury and property damage. Retained limit means the available limits of underlying insurance (General Liability, Commercial Auto and Workers Compensation Employers Liability) scheduled in the declaration or the self insured retention (SIR) whichever applies. The SIR is a dollar amount that will be paid by the insured for losses not covered by underlying insurance but covered in the umbrella.
Duty to Defend
The insurer agrees to defend any insured against a suit seeking damages or covered pollution cost or expense. The duty to defend ends when the liability coverage limit of insurance has been exhausted by payment of judgments or settlements.
Follow-Form Provisions
The follow-form provision essentially states that the Commercial Umbrella coverage follows the underlying insurance provisions, exclusion and limitations. Some exclusions include the follow-form provision which states that ethe exclusion does not apply to the extent that valid underlying insurance exists or would have existed but for the exhaustion of limits due to claims or judgments. The follow-form provision can be found in the Liquor Liability, Employers Liability, and Pollution exclusions.
Personal and Advertising Injury Liability (Coverage B)
The policy pays on behalf of the insured the ultimate net loss in excess of the “retained limit” because of personal and advertising injury. Personal and advertising injury means injury, including consequential bodily injury, arising out of one or more of the following offences: False arrest, detention or imprisonment; malicious prosecution; wrongful eviction, wrongful entry or invasion of right of private occupancy or a room, dwelling or premises that a person occupied, committed by or on behalf of its owner, landlord or lessor; oral or written publication that slanders or libels a person or organization; oral or written publication that violates a person’s right to privacy; the use of another’s idea in an advertisement or infringement upon another’s copyright, trade dress or slogan.
Supplementary Payments
When the duty to defend exits, the policy will pay all expenses incurred to defend the insured; up to $2,000 for the cost of bail bonds; all reasonable expenses incurred by the insured at the company’s request to assist in the investigation or defense of any claim or suit including the actual loss of earnings up to $250 a day because of time off from work; all court costs taxed against the insured; prejudgment interest awarded against the insured on that part of the judgment paid; all interest on the full amount of any judgment paid. These payments do not reduce the limits of insurance. The company’s obligation to defend the insured and pay attorney fees and supplementary payments ends when the applicable limit of insurance has been used up in the payment of judgments or settlements.
Key Commercial Umbrella Exclusions
Auto
Automobile liability is excluded except for covered autos. Covered autos means an auto to which underlying insurance applies (autos covered in a scheduled underlying policy). Also excluded is any loss, cost, expense payable under or resulting from any first-party physical damage coverage; no-fault law, personal injury protection or medical payments coverage; or uninsured or underinsured motorist law.
Contractual Liability
The Commercial Umbrella policy does not provide coverage for Liability assumed under any contract or agreement however these are some exceptions: Liability that the insured would have had in the absence of the contract or agreement; liability assumed in a contract or agreement that is an insured contract, provided the bodily injury or property damage occurs subsequent to the execution of the contract or agreement. Reasonable attorney fees are included if such defense has also been assumed in the same insured contract.
Damage to Impaired Property or Property Not Physically Injured
The Commercial Umbrella does not provide coverage for property damage to impaired property or property that has not been physically injured arising out of a defect, deficiency, inadequacy or dangerous condition in the insured’s product or work or a delay or failure by the insured or anyone acting on the insureds’ behalf to perform a contract or agreement in accordance with it’s terms. This exclusion does not apply to loss of use of other property arising out of sudden and accidental physical injury to the insured’s product or work after it has been put to its intended use.
Damage to Property
The Commercial Umbrella does not provide any coverage for property damage to property the insured owns, rents, or occupies; property owned or transported by the insured arising out of the ownership, maintenance or use of a covered auto. Also excluded is property damage to premises the insured sells, gives away or abandons if the property damage arises out of any part of that premises; property loaned to the insured; personal property in the insured’s care, custody or control and that particular part of real property which the insured or any contractor working directly or indirectly on the insured’s behalf are performing operations, if the property damage arises out of those operations and that particular part of any property that must be restored, repaired or replaced because of the insured’s work was incorrectly performed on it.
Damage to Your Product
The Commercial Umbrella does not provide coverage for property damage to the insured’s product arising out of it or any part of it.
Damage to Your Work
The Commercial Umbrella does not provide coverage for property damage to the insured’s work arising out of it or any part of it and included in the products-completed operations hazard.
Employers Liability
Employers Liability coverage is excluded however follow form provision applies. The umbrella will respond on an excess basis over the underlying Employers Liability coverage in the Workers Compensation policy.
Employment Related Practices
Bodily injury to a person arising out of any refusal to employ, termination of that employment or employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or malicious prosecution directed to that person is excluded.
ERISA
The Commercial Umbrella policy excludes any obligation of the insured under the Employee Retirement Income Security Act of 1974 (ERISA), and any amendments thereto or any similar federal, state or local statute.
Expected or Intended Injury
The insurer will not pay for bodily injury or property damage that is expected or intended from the standpoint of the insured.
Liquor Liability
Liquor Liability coverage is excluded however follow form provision applies. If liquor liability coverage is present in the underlying General Liability policy, the umbrella will respond on a excess basis following the provisions of the underlying Liquor coverage.
Pollution
Pollution coverage is excluded however follow form provision applies. The Commercial Umbrella policy will respond on an excess basis following the pollution coverage provisions in the underlying General Liability policy.
Professional Services
Bodily injury or property damage due to rendering of or failure to render any professional service is excluded.
Recall of Products, Work or Impaired Property
The Commercial Umbrella does not provide coverage for damages claimed for any loss, cost or expense incurred by the insured or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of the insured’s product, work or impaired property if such product, work or property is withdrawn or recalled from he market or from use by any person or organization because of known or suspected defect, deficiency, inadequacy or dangerous condition in it.
War
Bodily injury or property damage however caused, arising, directly or indirectly, out of war including undeclared or civil war;
Workers Compensation
The Commercial Umbrella excludes any obligation of the insured under a workers’ compensation, disability benefits or unemployment compensation law or similar law.
Not all coverages may be available in all states and limits may vary by state. For specific details, please refer to the appropriate Merchants form, which can be found in the Company Forms Library on Merchants website.
