What type of insurance coverage protects a contractor when their general liability limits are exceeded?
Correct Answer
C) Umbrella liability insurance
Umbrella liability insurance provides additional coverage above the limits of primary liability policies. It kicks in when the underlying general liability, auto, or other primary coverage limits are exhausted.
Why This Is the Correct Answer
Umbrella liability insurance is specifically designed to provide excess coverage that kicks in when the limits of underlying primary insurance policies are exhausted. It acts as a 'safety net' above general liability, auto liability, and other primary coverages. This type of policy provides broader coverage and higher limits, protecting contractors from catastrophic losses that exceed their standard policy limits. The umbrella policy only responds after the underlying coverage has been exhausted, making it the perfect solution for situations where general liability limits are exceeded.
Why the Other Options Are Wrong
Option A: Errors and omissions insurance
Professional liability insurance covers errors, omissions, and negligent acts in the performance of professional services, but it does not provide excess coverage over general liability limits. It's a separate type of coverage for professional mistakes, not additional liability limits.
Option D: Commercial auto insurance
Errors and omissions insurance is essentially the same as professional liability insurance and covers mistakes in professional services. It does not provide excess coverage above general liability limits, but rather covers a different type of risk entirely.
Memory Technique
Think 'UMBRELLA = UNDER + OVER' - it goes over your underlying policies when they're used up. Also remember: Umbrella = Extra protection when it's 'raining' claims.
Reference Hint
Florida Building Code Chapter 4 - Insurance Requirements, or Business and Finance Study Guide Chapter on Insurance Coverage Types
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