“I didn't say it was your fault. I said I was going to blame it on you.” – Unknown
When thinking about defining WHAT IS excess liability or umbrella liability, this quote is probably the best definition. Really? Yep. I mean, maybe it’s not the technical definition, but it certainly answers the call of WHY you would want to have excess liability.
Excess liability, or umbrella liability as it’s more commonly known, is the layer of liability that comes in over top of your various liability coverages. For a homeowner, it would come in over top of your homeowners’ and auto liability. For a business owner, it would come in over all sorts of coverage, from general liability to professional liability to auto liability to specialty liability. Whatever your particular lot in life is, you’ve probably either been encountered by or been encouraged to purchase excess liability insurance. This layer ranges from as small as $1,000,000 to really a limitless number, depending on the size of the risk insured.
By now you’re thinking to yourself, “Why in the world would I need a million dollars in coverage? I’m not even worth (put in the value you’re actually thinking)!” Well, here are a few stats to get your mind going:
- Attorney costs can range anywhere from $200-$? per hour depending on the law firm
- The average lawsuit, frivolous or not, can cost up to $25,000 in pre-trial discovery alone
- Over 50% of lawsuits are appealed
Of course these are broad statistics that are related to lawsuits. The point is, when you think of excess liability, think of the COST TO DEFEND, not the WORTH OF THE PERSON. However, it is worth noting that the worth of the person is important, and that’s why we would recommend a higher limit of liability on say, Donald Trump or Warren Buffett than we would John Doe. The wealthier the person, the bigger the target.
This brings us back to our original point: people will sue for anything at any time for any reason. You don’t have to be guilty of anything. You just have to be blamed.
In the end, while excess liability may not be for everyone, it certainly comes in handy when you are sued, frivolous or not, as it relates to defense cost.