It was too good to be true but even I – a hardened, "doom-and-gloom" insurance man who’s seen it all – even I 
was beginning to think it wouldn’t happen….couldn’t happen.

But, of course, in the end it did.

For a long time I had not heard of a courier-related accident involving more than a million dollars in damages.

I was beginning to wonder if the insurance industry’s stock advice – to protect your business with about as 
much liability insurance as your annual revenues – was really appropriate.

Since regular liability insurance policies provide no more than one million dollars in protection, businesses are 
advised to obtain what is known as Umbrella Liability Insurance once their revenues approach one million dollars 
annually.

These Umbrella policies, which cover your liability and legal costs in excess of one million dollars, are considerably 
less expensive than primary insurance. Still, they certainly are not free. For companies already struggling with the 
high cost of insurance, is catastrophic liability protection really necessary?

Then I heard about a settlement of nearly $3 million in 1998 involving an accident that killed a mother out jogging 
with her baby.

In a moment my false security vanished.

It happened so quickly. The mother was jogging on the side of the road, pushing her baby ahead of her in a 
modern "stroller." She saw IT approach, saw IT advance into the intersection, saw IT turn left. She began to cross. 
She did not see IT realize that IT had gone the wrong way. She did not see IT veer back – right into her path.

The monster can materialize anywhere, at any time, without warning or mercy. In contrast to the little gremlins that 
cause frequent but relatively minor damage, the monster is much more difficult to analyze, contain and control. All 
it takes is one attack to darken the skies for years to come.

The most striking characteristic of the monster is its unpredictable nature. Consider our tragic example of the jogging 
mother. First, it took place in a state not known for awarding multi-million-dollar damages. Yet the size of the settlement 
speaks for itself.

Second, the woman died. While horrible, a fatality normally results in a lower payment than a critical injury requiring 
expensive and prolonged medical treatment. Yet in this case, costs skyrocketed anyway.

Third, as bad as it was, the loss could have been much worse. The baby, after all, was unharmed.

What if the accident occurred at a busy intersection, or involved a school bus or a vehicle carrying a family?

Most reputable insurance companies carry "primary" insurance limits of one million dollars for both auto and general 
liability. These primary insurance policies will not provide much protection against a monster, however. They run out 
of ammunition at one million dollars. Worse, they can lay down their arms and run … as when an insurance company 
agrees early on to pay out its limit, thereby releasing itself from having to pay further for your legal defense.

To protect your business against catastrophic claims, you may need more protection. This normally requires an Umbrella 
or Excess Liability policy.

The name umbrella is fitting. An umbrella provides an additional layer of protection against rain and wind. Similarly, the 
standard Umbrella or Excess policy provides an additional layer of insurance protection above your primary policy’s one 
million-dollar limit.

Both Excess and Umbrella policies usually "follow form." This means that their coverage follows that of your primary 
insurance and provides the same protection.

The main difference between an Umbrella policy and an Excess policy is the scope of the liability covered. An excess 
policy covers one type of liability only – such as auto liability. This usually is not what customers want you to have 
and gives you less value for your money.

A true Umbrella policy covers at least three separate types of liability: auto liability, general liability and employers 
liability (which is part of your workers compensation protection). It’s like having three (or more) excess policies in one!

In addition, Umbrella policies protect you against some unusual losses that may not be covered at all by your primary 
insurance.

For example, you may send someone abroad and that person may injure someone else. When your company is sued, 
you may find that your primary insurance does not cover accidents outside of the USA or Canada. Umbrella policies 
usually contain no such exclusion. Therefore, subject to a special deductible (retention), you’d be covered.

Of course, no insurance covers everything. Even a giant-killer like the broad- shouldered Umbrella Liability Policy has 
limitations. Certain specialized areas of liability are often not covered. These include pollution, employment practices 
(i.e. discrimination and harassment), business errors and cargo.

Policies from different companies can provide quite different benefits, terms and conditions, so review your policy 
with your broker. Beware of policies from unlicensed carriers – which are sometimes the cheapest but also may 
contain more limitations in the fine print.

Monster claims can happen. Indeed, in the courier industry they will happen with absolute certainty, if also with 
utter unpredictability.

While you can reduce your risk of falling victim to the monster by trying to control the accidents you have, all it 
really takes is one encounter to bring your business down.

Umbrella Liability Insurance is a cost-effective means of shielding your business from the full ravages of the monster. 
It is also a valuable selling tool that lets you show your customers that you invest in protecting them from the worst.

For those who wonder why shippers should be concerned, consider our original example of the jogging mother, where 
not only the delivery company – but also the shipper – was sued by the victim.

The worse the accident, the greater are the chances of everyone getting dragged in.

Deciding how best to protect yourself against the monster depends on your attitude toward risk. A five million dollar 
umbrella policy, after all, still leaves you exposed to a ten million dollar catastrophic loss.

COURIER MAGAZINE - May/June 1999            [ Back To Table of Contents ]

(c) copyright, 1999 by KBS International Corp.  All Rights Reserved.