How does your business umbrella policy handle a loss involving an uninsured or an underinsured motorist? Uninsured Motorist (UM) laws intend to put an injured person in the position he would have been in if the party causing the injury had met his or her minimum financial responsibility (varies by state). Underinsured Motorist (UIM) laws are intended to put an injured person in the position he would have been in if the party causing the injury had met his or her actual financial responsibility (varies by accident circumstances). Recently, court decisions have favored allowing "full compensation" for losses, resulting in more judgments paid under a coverage part that was designed to be the "last resort" (collecting coverage under your own policy).

Liability coverage is designed to pay for you injuring others. Let's take a simple example. Phil owns PC Physician, a firm that services personal computers and laptops, including pick up and delivery. While making a house call, a PC Physician service van driver is distracted and fails to see a red light. The van runs into a stopped car. The injury to the car's driver and the damage to her vehicle are covered by the liability section of PC Physician's automobile policy. The injury and damage to the PC Physician driver and van are not covered.

An Umbrella Liability policy only provides liability coverage, not coverage to you for any injuries you receive. UM and UIM coverages provide coverage to you for injuries caused by another party, acting as substitute liability coverage. While state laws are fairly clear in their requirement that primary auto policies include UM and UIM protection, it's not clear if umbrellas (secondary or excess policies) are also subject to the requirement.

In recent years, more attempts have been made to force umbrellas to pay for injuries involving uninsured or underinsured drivers. At each level of the court system, conflicting opinions have been written on this subject. The result is tremendous confusion within the legal system and the insurance industry whether an Umbrella Liability policy provides Uninsured and Underinsured Motorist coverage. The current trend is, where permitted by law, requiring insurance companies to have their policyowners sign that they either accept or reject the coverage in the Umbrella.

The solution is to contact your agent and discuss the issues within your state and the states where you operate automobiles. Determine what options are available from your Umbrella Liability carrier and what best protects your assets.

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