When Your Primary NJ Business Insurance Runs Dry, Open an Umbrella

Even in business, punctuations still matter.

During a recent hearing in Texas, British Petroleum (BP) argued that it’s entitled to $750 million in insurance money after the Deepwater Horizon oil spill of 2010. The breakdown of the cost, according to a Bloomberg report, includes a $50-million indemnity from BP’s primary insurer and a total of $700 million in excess coverage from other underwriters.

BP’s justification? A missing comma.

BP argues the drilling contract skipped a needed comma, and that the omission either granted access to coverage or created ambiguity that triggered an exception. Under Texas law, an ambiguous insurance contract would be interpreted in its favor, BP contends.

The clause in the drilling agreement reads that BP, its subsidiaries and workers would be “named as additional insureds” in Transocean’s polices “except Workers’ Compensation for liabilities assumed by [Transocean] under the terms of this contract.”

Whether or not the Texas Supreme Court rules for or against BP, this gives a chilling insight on how the smallest details in any contract can empty a company’s coffers. This is no isolated case, either. In 2006, a telephone company in Canada argued that it was entitled to almost USD 900,000 due to a comma issue in the contract, but ultimately lost.

Be it an oil spill or the termination of a partnership, a missing punctuation or two can prove that your business owes the other a lot. NJ business insurance policies will protect you from indemnity in various aspects, from general liability to property insurance. However, these insurance policies can only protect your business up to a certain extent.

Your business needs an umbrella insurance for excess liability. If an insurance policy has been exhausted due to hitting its coverage limit, umbrella insurance can pay the rest of the liability. This policy may still offer limited coverage, though it will at least extend your reach if your liability turns out much bigger than expected.

You may ask: “Why can’t I just expand my general liability insurance rather than buy an umbrella insurance?” You’ll save more in premiums when you opt for an umbrella policy than if you were to expand your primary coverage. A large firm can pay over $3,000 a year for general liability coverage of $1 million. If you need another million, an umbrella policy can only cost below $1,000.

Overall, umbrella insurance is a great way to reduce insurance expenses while expanding a company’s protective field. As secondary coverage, umbrella policies won’t take effect until the primary coverage is exhausted, making them rather affordable. Trusted insurance companies in NJ such as InsureYourCompany.com suggest buying an umbrella to keep you dry during a legal storm.

(Source: “BP argues missing comma in insurance contract entitles company to US$750-million,” Bloomberg [c/o Financial Post], September 16, 2014)