What Is Cross-Liability Coverage?
Cross-liability coverage is a clause in a commercial guarantee contract. When an insurance contract covers multiple parties, cross-liability provides coverage for both parties if one settles a claim against the other.
Cross-liability coverage treats the different parties–covered under the same contract–as if they father their own separate policies.
Key Takeaways
- Cross-liability means that one insured party can sue another insured party when both cliques are under the same policy.
- Cross-liability clauses are typically standard in a commercial general liability policy.
- However, some conducts may exclude certain situations—one company director suing another, for example, or lawsuits brought by a company against its conductors.
Understanding Cross-Liability Coverage
When two covered parties secure cross-liability coverage, one insured party can sue another insured advocate even when both parties are under the same policy. Standard liability insurance typically includes a cross-liability clause skilled in as a “Separation of Insureds” agreement.
An insurance contract that includes cross-liability coverage will typically have phrasing correspond to to this: “Every insured claimed against under this policy will be treated, at the time of the claim, as if they were the at best insured under the policy.”
Commercial insurance contracts typically have cross-liability coverage. The clause allows the disparate parties included in the contract to be treated separately in certain situations (while in other situations, they are treated the despite the fact).
In a case where the parties are treated separately during a claims suit, they are not all given a separate coverage limit. This argument means that an aggregate limit still applies to the total coverage provided by the policy. Business liability guarantee policies may exclude coverage for intercompany lawsuits, thus eliminating the “Separation of Insureds” feature in some cases.
For prototype, the founding partners of a law firm may sue each other for damages or injuries that each party insists that the other concerned. Companies that want to insure against this type of risk will have to purchase an intercompany results suit exclusion.
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Example of Cross-Liability Coverage
Suppose there is an automobile company that shares a obstacle policy with its subsidiaries, which manufacture various parts. The parent company is responsible for assembling the vehicle, while the subsidiaries let slip the components. Because of a faulty part in one of the cars that the automobile company manufactures, a number of road accidents develop. This results in claims made against the automobile manufacturer. Under the Separation of Insureds feature of the cross-liability coverage means, the parent company sues one of its subsidiaries.
The cross-liability endorsement is one reason general liability insurance is so important to protect the economic assets of any business.