Commercial general liability (CGL) and umbrella liability are not competing choices. They are layers. The CGL is the base policy that responds first to injury and property damage claims. An umbrella sits on top and adds more limit above the CGL and, usually, above your auto liability.
For snow contractors, the question of whether to add an umbrella usually comes from a contract that asks for a higher limit than the base policy carries. This page explains how the two fit together so you can have a better conversation with your broker.
Definitions
Commercial general liability. The Insurance Bureau of Canada defines it as "a standard form of liability insurance developed for use in the business sector." For a snow business, it is the policy that typically responds to a pedestrian who slips on a site you service or a blade that damages a client's property. See general liability for snow removal.
Umbrella liability. IBC describes it as "a special form of liability policy designed to protect the insured for certain unknown contingencies over and above normal coverages." IRMI, a US reference, describes an umbrella as sitting over primary auto and general liability policies and providing extra limits. See umbrella liability.
Side by Side
| CGL | Umbrella | |
|---|---|---|
| Role | Primary policy, responds first | Sits above underlying policies |
| Typical claims | Third party injury and property damage from your operations | Claims that exhaust the underlying limit |
| Covers auto claims? | Generally no; plow truck claims usually go to auto insurance | Often sits over auto liability as well, depending on the policy |
| Can you buy it alone? | Yes | Usually needs underlying policies in place |
| Why contractors buy it | Foundation of a snow business insurance package | To reach higher limits than the primary policies carry |
How the Layers Work in a Claim
Imagine a serious slip and fall claim. The CGL responds first, up to its per occurrence limit and subject to its aggregate. If the claim is larger than that limit, the umbrella can respond above it, up to the umbrella's own limit and subject to its terms. For a closer look at how limits work, see per occurrence vs aggregate limits.
An umbrella is only as good as the layers under it. If the CGL has a snow and ice exclusion, or the underlying policy does not respond for another reason, do not assume the umbrella will fill the gap. Ask your broker how the umbrella's wording lines up with the policies beneath it.
Why Contracts Bring Umbrellas Into Play
Commercial and public clients set their own insurance requirements, and they vary. Examples from published snow tenders:
- The Township of Otonabee-South Monaghan's facilities winter maintenance RFP asked for CGL of $5,000,000 per occurrence and $10,000,000 aggregate, plus owned auto liability of not less than $5,000,000.
- The Town of Slave Lake's 2020 to 2023 Government Centre snow tender asked for $5,000,000 CGL and $2,000,000 auto liability.
- A Bruce Grey Catholic District School Board snow contract template asked for $2,000,000 CGL per occurrence and $2,000,000 auto liability.
When a contract's required limit is higher than your primary policy, an umbrella is one common way to close the difference. Some contracts accept a combination of primary and umbrella limits; others spell out the requirement differently. Read the insurance clause carefully and send it to your broker. See $2M vs $5M liability.
Questions to Ask Your Broker
- Does the umbrella sit over my CGL, my auto policy and my employer's liability, if any?
- What underlying limits does the umbrella insurer require?
- Are there exclusions in the umbrella that are not in the CGL?
- Will my clients accept the umbrella to meet their stated limit?
- Can the umbrella extend additional insured status the way my contracts require?
Who Tends to Look at Umbrellas
Contractors serving commercial sites, municipalities, institutions and property managers are most likely to see higher limit requirements. Residential contractors may never be asked. The decision depends on your contracts and exposure, and a broker can walk you through it.
General information only, not insurance advice. Coverage depends on policy wording.
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Sources
- IBC glossary
- IRMI: Umbrella liability policy
- Township of Otonabee-South Monaghan winter maintenance RFP
- Town of Slave Lake snow removal bid package (2020)
- Bruce Grey Catholic DSB snow contract template
Frequently Asked Questions
Is umbrella insurance the same as general liability?
No. General liability is the primary policy that responds first. An umbrella adds more limit above general liability and usually above auto liability.
Can I buy an umbrella without general liability?
Umbrella insurers usually require underlying policies to be in place. Your broker can confirm the requirements.
Will an umbrella cover a claim my CGL excludes?
Do not assume so. Umbrellas have their own wording and exclusions. Ask your broker how the layers line up.