Liability Insurance

Umbrella insurance is like an extra liability insurance which safeguards you against various claims and lawsuits. Thus, it helps in protecting your assets in the following two ways=

  • It gives additional liability coverage over and above the limits of your auto and home insurance policies. The liability umbrella insurance policy cover kicks in when the liability on the other insurance policies has been exhausted
  • It provides cover for those claims which are mainly excluded from other liability insurance plans, including libel, slander, false arrest, etc.

As this policy offers extra cover over and above the defined limit of your insurance policies like, car insurance, home insurance, etc.; it is a crucial policy which plays an important role once you exhaust the limit of all your others insurance policy. It means, once the sum insured of all the other policies are exhausted, umbrella insurance policies come into the picture to give you additional coverage.

Here are some of the coverages which are offered under a standard umbrella insurance policy=

  1. Any damage or loss caused to your property
  2. Different types of lawsuits and legal proceedings
  3. Bodily Injury Liability= The situation where you have harmed another person’s body or cause it harm in any other way, the umbrella insurance policy will come forward to cover you against various losses or damages like you would be covered for your medical bills. There are certain circumstances under which it will be held valid are=
  • When a loss or accident caused by your vehicle
  • When the injury happens due to falling inside your premises
  • When the injury is caused by your pet animal
  1. Property Damage Liability= It covers those costs which you would have to incur in case of damages to a third person’s tangible property in various incidents like a car accident, mishandling of belongings of a third-party, losses or damages caused by your child in a school premise, etc.

The liability umbrella insurance policy plays a major role by covering you against liability which may arise due to libel (harmful written statement), slander (harmful spoken words), false detention, etc. It also comprises of a prosecution which may happen due to malicious intent.

Read more: Does General Liability Insurance Cover Property Damage?

Case: 1

Since, 2012, R.S Automobiles has established itself in the construction world. The company manufactures various automobile components for buyers situated across the world. Last year, the company had to face a tough situation when one of its buyers, Rajan, filed a case against him. As per Rajan, he was riding a motorcycle when the tyre of his bike burst and caused severe injuries to Rajan. Here, Rajan filed a case against R.S Automobiles as the tyres manufactured by them failed to withstand the excessive heat.

Here, R.S Automobiles had a product liability insurance, and therefore, the company approached the insurer for the claim settlement. Here, R.S Automobiles had a product liability insurance which was offering the cover of Rs 10 lakh. The total claim filed by Rajan was of Rs 12 lakh. Here, product liability insurance paid Rs 10 lakh, and the remaining Rs 2 lakh had to be paid by R.S Automobiles itself.

However, the situation would have been different if R.S Automobiles had purchased umbrella insurance policy. The umbrella policy would have helped in covering the amount which was over and above the sum insured of the company’s product liability insurance policy. It means, here, the umbrella insurance policy would have covered the remaining Rs 2 lakh and R.S Automobiles would not have to pay anything from its pocket.

Case: 2

Situated in Nagpur, L.S Hospital is a multi-specialist hospital which is offering impeccable medical facilities to patients from both India and abroad. A few years ago, the hospital had to deal with a legal case which was filed by one of the patient’s family. The patient, Raghu was taken to the hospital after he complains of severe chest pain. The initial medical reports suggested a mild heart attack and to control his health; doctors gave him some medicines. However, soon after taking the medicines, the condition of Raghu deteriorated further, and he died.

Read More: How to Calculate the Premium for Product Liability Insurance?

Later it was found that Raghu was allergic to certain medicines which were given to him. Here, relatives of Raghu filed a case against the doctors who attended him and gave medicines without checking his medical history.

As L.S Hospital had bought errors & omission insurance policy for all its doctors, it approached the insurance company for the claim settlement. Here, doctors were held guilty and were asked to pay Rs 70 lakh to the family of Raghu who was also the breadwinner. As errors & omission insurance policy had a coverage of Rs 50 lakh only, the remaining Rs 20 lakh was paid by the hospital itself.

The situation would have been different if L.S Hospital had umbrella insurance policy. The policy would have paid the remaining Rs 20 lakh to Raghu’s family on behalf of the hospital.