Short Answer
Potentially. Some contracts specifically allow required insurance limits to be satisfied through a combination of primary and Umbrella or Excess Liability coverage. But having a $1 million Auto Liability policy and a $5 million Umbrella doesn't automatically mean a $2 million Auto Liability requirement has been satisfied. You need to review both the contract and the insurance program.
When Does Umbrella Auto Liability Apply?
First, determine exactly what the contract says.
Insurance requirements in a contract can look absolute at first read, such as a flat "$2 million Auto Liability" line item. But many contracts include additional language elsewhere stating that limits can be satisfied through a combination of primary and excess or umbrella policies. That language is easy to miss on a quick read, and it materially changes the analysis.
What Should You Check Before Relying on an Umbrella Policy?
Review:
- The Auto Liability limit required by the contract
- Whether the contract permits primary + Umbrella/Excess limits to be combined
- The firm’s existing Auto or Hired & Non-Owned Auto coverage
- Whether the relevant Auto coverage sits underneath the Umbrella/Excess
- The actual terms and exclusions of the Umbrella/Excess policy
Umbrella Auto Liability Example
Assume a contract requires $2,000,000 in Auto Liability. The engineering firm carries $1,000,000 in Auto Liability and $5,000,000 in Umbrella.
If the contract permits primary and umbrella/excess limits to be combined, the next question is whether the firm's Umbrella/Excess coverage actually applies over the relevant Auto Liability coverage. Don't determine compliance by simply adding $1 million and $5 million together.
Related Questions about Umbrella Auto Liability
What if my engineering firm doesn't own vehicles?
That's common. An engineering firm may have employees driving their own vehicles, renting vehicles, or otherwise creating hired and non-owned auto exposures without owning a fleet. In that situation, the firm's Hired & Non-Owned Auto coverage and Umbrella/Excess structure should be reviewed against the contract requirement.
Does "follow form" automatically mean my Umbrella satisfies the requirement?
No. Don't rely on the phrase "follow form" alone. Even when Excess coverage follows an underlying policy in certain respects, the Excess/Umbrella policy can contain its own terms, conditions and exclusions. So the actual policies should be reviewed.
Isn't the Certificate of Insurance enough?
Not necessarily. A COI might show Auto at $1M and Umbrella at $5M, that tells you the limits being represented on the certificate. It doesn't by itself establish that the Umbrella applies over every Auto exposure or that every provision of a particular contract has been satisfied.
Commercial Auto
For vehicles owned, leased, or used by the business.
Umbrella Liability
Sits above multiple underlying policies and responds when primary limits are exhausted.
Excess Liability
Extends the limits of a single underlying policy without changing its terms.