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There was hip hop artist Flo Rida’s $82 million breach of contract case against an energy drink company that tried to hide money from him. And then we saw a nearly $1 billion defective seatbelt liability award against Japanese carmaker Mitsubishi.
Both were just two of 89 lawsuits that resulted in “nuclear verdicts” in 2023, or verdicts that surpassed $10 million. Last year also saw 27 more cases that could be described as “thermonuclear,” with verdicts above $100 million.
Altogether, juries across the country last year found corporate defendants liable for over $14.5 billion in eye-popping verdicts.
To say that we’re living in an increasingly litigious society doesn’t begin to do justice in explaining the reasons driving this trend.
The factors involved include more aggressive attorney advertising and third-party litigation funding, a growing “industry” in which outside parties finance the costs of taking people to court in exchange for a cut of any resulting settlements or verdicts.
And then there’s also the “reptile strategy,” an approach plaintiffs’ lawyers use to appeal to jurors’ emotions to generate anger on the premise that companies increasingly favor profits over public safety.
As you might imagine, all this is keeping insurance company lawyers extremely busy.
An insurance carrier with deep experience and resources to help defend your business against the rising risks of claims liability can make a huge difference.
What else can help? Having an Excess Liability policy in place.
Excess Liability kicks in when the limits of an underlying policy, including general liability, are exhausted, offering additional coverage that can help stabilize your finances should your business find itself facing a huge verdict.
For example, if your general liability insurance policy limit is $10 million and you’re hit with a $15 million jury verdict, an excess liability policy would cover the $5 million that’s not covered by the general liability policy.
It’s important to note Excess Liability does not broaden the scope of coverage but rather increases the maximum payout for covered claims.
In other words, Excess Liability is not Umbrella Insurance.
While both types of insurance provide additional liability coverage, they function differently:
Excess Liability Insurance strictly extends the limits of a single underlying policy. It’s straightforward and provides additional coverage without changing the underlying terms and conditions.
Umbrella Insurance not only extends the limits of multiple underlying policies but can also provide coverage for certain claims not covered by the primary policies. It’s more versatile and comprehensive, offering broader protection.
Excess liability insurance is particularly beneficial for:
- Construction and contracting businesses that face high risks due to the nature of their work, making additional coverage essential.
- Medical professionals and institutions that require higher limits to protect against malpractice claims.
- Manufacturing operations with risks related to product liability and workplace accidents.
- Transportation companies involved in logistics and transportation deals with significant risks from vehicular accidents and cargo damage.
Considerations When Purchasing Excess Liability Insurance
Not every business needs to worry about an Excess Liability policy. To determine whether you do or not, consider the following:
- Evaluate Your Risks: Understand the specific risks your business faces. This will help determine the appropriate coverage limits you need.
- Understand Your Primary Policies: Review the limits and exclusions of your primary policies to ensure the excess liability coverage aligns properly.
- Policy Terms and Conditions: Carefully examine the terms, conditions, and exclusions of the excess liability policy to ensure it provides the necessary coverage without unexpected gaps.
The bottom line? For a business, having this extra layer of security can mean the difference between weathering a major claim or facing financial hardship. An Excess Liability Insurance policy is a prudent step toward safeguarding your business’s future.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. For more information, visit our website or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.