Commercial Umbrella Insurance provides liability coverage over and above the limits of your existing policies. It’s not a legal requirement, but the benefits of having it are substantial.
Commercial Umbrella Insurance in action
Commercial Umbrella Insurance can help protect your condo & HOA buildings in a range of scenarios. Below are two examples of real-life scenarios (source: LexisNexis) where coverage was needed.
· A man suffered severe burns from hot water as a child when his Association failed to install a proper hot water system. He was awarded approximately $9.5 million.
· A man suffered severe head injuries following being assaulted in the lobby of his building by alleged negligent security. He was awarded $2.3 million.
Why your condo/ HOA buildings need Commercial Umbrella Insurance
Commercial Umbrella Insurance covers catastrophic situations where liability claims exceed the limits of your existing policies.
If, for example, you have a $1 million liability limit on your General Liability Insurance and a $10 million liability limit on your Commercial Umbrella Insurance, your General Liability insurer will cover the first $1 million of a claim and your Commercial Umbrella insurer will cover an additional $10 million.
Without Commercial Umbrella Insurance, you’d have to use your company or personal assets to cover legal fees or judgments that exceed your policy limits
Types of real estate properties that should have a Commercial Umbrella policy
Commercial Umbrella Insurance is designed to protect the following types of real estate investments:
· Apartment buildings
· Cooperatives and condominiums
· Commercial and office buildings
· Garden apartment complexes
· Homeowners’ associations
· Student housing
· Senior housing
Your existing insurance policies will go a long way towards protecting you against most liability judgments, but when unexpected catastrophes arise, a Commercial Umbrella Insurance policy will help ensure your condo and HOA buildings are not affected by high-value claims.
Coverage limits available
The amount of coverage you require depends on several factors, including the nature of your business, the value of your real estate investments and the liability limits on any underlying liability policies.
Typically, a Commercial Umbrella policy would cost $500 to $1,000 per million. For example, if you wanted a $10 million policy it would cost you $10,000. Anything over a $5 million to $10 million policy would be considered a Risk Purchasing Group (RPG). These rates have been increasing over the past couple of years.
Rates on the rise
Due to the current hard market, umbrella rates have been on the rise and the days of having high limit umbrellas at very low premiums may be gone.
Simply put, insurance companies are losing money so rates are increasing. This is happening in New York especially, because it’s one of the most litigious states and because the harsh NY labor lawsare very unfriendly to property owners. If a contractor or employee is injured, the property owner is typically held responsible whether or not there was negligence.
Lawsuits are increasing, juries are more sympathetic, and judgments are piercing the umbrella policy which wasn’t necessarily happening in the past. Insurance companies that were once charging a minimum premium for a $100 million umbrella policy are no longer giving away policies to that extent and have increased their rates.
What can you do?
Lower the limits to offset your premium increases on your Commercial Umbrella policy. At one point, a $100 million policy may have been cost-effective. If that’s no longer the case, it makes more sense to reduce the limit.
To find out more about how Commercial Umbrella Insurance could help you protect your New York or New Jersey condo, co-op or apartment building, please contact us today.