Umbrella/excess coverage
One extra limit, several policies underneath it. Here is what it actually pays for, and when.
Umbrella (or excess) coverage adds one higher liability limit that sits on top of the association's general liability, D&O, and auto policies. It does not pay until the underlying policy's own limit is used up by a covered loss, and it typically shares one limit across several policies rather than duplicating any single one of them.
How the umbrella actually pays a claim
Say a slip-and-fall claim against the association is valued at $2 million. The general liability policy has a $1 million limit. The umbrella does not split the claim or pay alongside the primary policy. The general liability policy pays its full $1 million first, and only then does the umbrella pay the remaining $1 million.
"Excess coverage is sequential, so it only takes effect when the primary policy reaches its limit."
Source: FAQs About Excess Liability for HOAs, Kevin Davis Insurance Services
If the claim had been $800,000, the umbrella would not respond at all. It only exists for the losses big enough to blow through the primary policy underneath it.
One policy, several underlying lines
Instead of buying a bigger general liability policy, a bigger D&O policy, and a bigger auto policy separately, most associations buy one umbrella that adds a shared higher limit across all three at once.
"typically add[s] a higher limit of liability to all liability policies... general liability, D&O, automobile, etc."
Source: Community Association Insurance Manual, Epsten, APC
Exactly which underlying policies your umbrella is scheduled over, and how much limit it adds, varies by carrier and by your policy's own declarations. Ask your broker for the schedule of underlying policies before assuming your umbrella follows every line the association carries.
What it doesn't cover
An umbrella only stretches the limits of liability policies that already exist underneath it. It does not create coverage where none exists. General liability itself does not pay for damage to the association's own buildings, roofs, or equipment, only for bodily injury and property damage claims arising from common areas and normal operations. Since the umbrella sits on top of general liability, it inherits that same boundary. A bigger umbrella will not turn a property claim into a liability payout.
For damage to the association's own structures, the relevant policy is property insurance, not the umbrella.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
A slip-and-fall claim against the HOA totals $2 million against a $1 million general liability limit and a $5 million umbrella. What happens?
The board wants extra liability protection across general liability, D&O, and auto without buying three separate larger policies. What should it consider?
A clubhouse pump fails and floods the pool equipment room, damaging association property. The board asks if the $5 million umbrella will pay for repairs. What's the answer?
Sources
- FAQs About Excess Liability for HOAs, Kevin Davis Insurance Services
- Advising Community Associations on D&O Coverage Limits and Exclusions, Kevin Davis Insurance Services
- Community Association Insurance Manual, Epsten, APC
- HOA General Liability: What Premises and Operations Really Covers, StarNet Insurance Group
Insurance
Not sure what your general liability policy actually excludes? Read General liability next.
Which underlying policies an umbrella is scheduled over, and how much excess limit is enough for your association, vary by carrier and by your risk profile. Check your umbrella's schedule of underlying policies with your broker.