Which of the following types of liability losses would typically be covered by a personal umbrella liability policy?

• A. A lawsuit for injuries caused to a neighbor in a slip-and-fall accident at your home
• B. Professional malpractice claims against you as an accountant
• C. Fines and penalties imposed by a regulatory agency
• D. Business liability arising from your sole proprietorship

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of a personal umbrella liability policy. This type of insurance provides additional liability coverage beyond the limits of your standard homeowner's or auto insurance policies. It is designed to protect against significant financial losses due to lawsuits or claims.
2. Step 2: Analyze the types of liability losses mentioned in the problem. These include: (1) a lawsuit for injuries caused to a neighbor in a slip-and-fall accident at your home, (2) professional malpractice claims against you as an accountant, (3) fines and penalties imposed by a regulatory agency, and (4) business liability arising from your sole proprietorship.
3. Step 3: Evaluate each type of liability loss to determine if it falls under the scope of a personal umbrella liability policy. Typically, personal umbrella policies cover personal liability claims, such as injuries to others on your property, but they do not cover professional malpractice, regulatory fines, or business-related liabilities.
4. Step 4: Focus on the first option, 'a lawsuit for injuries caused to a neighbor in a slip-and-fall accident at your home.' This type of liability is personal in nature and is generally covered by a personal umbrella liability policy, as it extends protection for personal incidents beyond the limits of standard homeowner's insurance.
5. Step 5: Conclude that the other options—professional malpractice claims, regulatory fines, and business liability—are not typically covered by a personal umbrella liability policy, as these involve professional or business-related risks that require specialized insurance policies.