A commercial general liability insurance policy covers a wide range of liability loss exposure which can be faced by various organisations. Most importantly, a commercial general liability is the foundation for most of the liability insurance policies of the organisation’s liability insurance policies.

General liability and umbrella liability are two broad categories of the commercial general liability insurance policies, which offer coverage to the insured concerning those claims which arise due to third-party bodily injury or property damage.

Umbrella insurance is an extra liability insurance cover which offers protection against various claims and lawsuits. It means the policy plays a crucial role by offering you coverage over and above your liability insurance policy. The umbrella insurance policy becomes active as soon as the liability limit on other insurance policies is exhausted.

A general aggregate is the maximum limit of coverage which applies to commercial general liability insurance policy. Under the commercial general liability insurance, the general aggregate limit is applied to the covered bodily and property damage and all covered personal & advertising injury. When paid losses in these categories reach to the aggregate limit, the insurer considers those limits are exhausted, and no further losses in any of those categories are paid under the commercial general liability insurance.

The general aggregate limit restricts the amount that would be paid by the commercial general liability insurance policy, irrespective of the number of claims and occurrences.

On the other hand, umbrella liability policies will respond to those claims which arise in case of a catastrophic loss which is more than the per occurrence limit under the primary commercial general liability insurance policy. Umbrella insurance policy is an additional amount of coverage which is offered once the underlying limit of the general liability insurance is exhausted. Usually, an umbrella policy is sold as an individual insurance policy.

In the event, when the series of claims have exhausted the general aggregate limit, the umbrella policy will cover the other claims. There are certain situations as well when the umbrella policy also covers those claims which are not covered by the primary general liability insurance policy.

Case

Since 2010, K.S Construction has established itself as a leading player in the construction market. So far, the company has completed various commercial and residential projects across India. Last year, the company got a contract of constructing a four-story office building in Pune for J.K Jewels. When the construction was in full swing, J.K Jewels sent one of its members, Mr Jivesh Singh, from the top-management to visit and inspect the site. Unfortunately, when Jivesh was inspecting the construction site, he tripped over the electric cord and fractured his leg and arms.

Read more: Who is an Insured under Commercial General Liability Insurance?

Here, Jivesh filed a case against K.S Construction and claimed that the accident occurred because the company did not follow safety regulations at the site. Luckily, the construction company had a commercial general liability insurance and therefore, it approached the insurer for the claim settlement. Here, the total claim amount was Rs 1 crore, including compensation and medical expenses. However, the commercial general liability had the coverage of Rs 50 lakh, and therefore, the remaining Rs 50 lakh had to be paid by the construction company itself.

In this case, the general aggregate limit was Rs 50 lakh, and therefore, the insurer did not pay anything when this limit was crossed.

However, here the situation would have been different if the construction company had umbrella insurance policy. In this case, the umbrella policy would have helped in covering that amount which was above the general aggregate limit of commercial general liability insurance policy. It means, here, the umbrella insurance policy would have covered the remaining Rs 50 lakh and the construction company would not have to pay anything from own.

  • Commercial general liability insurance had general aggregate limit of Rs 50 lakh
  • Umbrella Insurance Policy had coverage of Rs 50 lakh