Bumbershoot Policy

Example

“The offshore drilling company purchased a $100 million bumbershoot policy to provide excess liability coverage above their primary marine general liability and protection and indemnity insurance.”

Memory Tip

Remember 'Umbrella for Ships' - just like a regular umbrella policy provides extra coverage over basic liability, a bumbershoot provides marine umbrella coverage over maritime policies.

Why It Matters

Maritime operations face enormous potential liabilities from oil spills, collisions, cargo damage, and environmental disasters that can reach hundreds of millions in damages. Bumbershoot policies provide the high-limit excess coverage these operations need to survive catastrophic claims that could otherwise bankrupt even large maritime companies.

Common Misconception

Some believe bumbershoot policies cover any water-related business activities, but they're specifically designed for traditional maritime and offshore operations. They don't typically cover marina operators, boat dealers, or recreational marine businesses, which need different types of coverage.

In Practice

A shipping company has $25 million in underlying marine liability coverage and purchases a $200 million bumbershoot policy. When one of their tankers causes an oil spill resulting in $150 million in cleanup costs and environmental damages, the underlying policy pays the first $25 million, and the bumbershoot policy covers the remaining $125 million. Without the bumbershoot coverage, the company would face $125 million in uninsured losses that could force bankruptcy.

Etymology

The term 'bumbershoot' is a whimsical American slang word for umbrella, combining 'umbrella' and 'parachute,' which the insurance industry adopted to describe this specialized marine umbrella coverage in the mid-20th century.

Common Misspellings

Related Terms

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