Cross Liability Clause
A clause in multi-party policies that applies cover separately to each insured, so that a claim brought by one co-insured against another co-insured under the same policy is covered.
- Clause type
- Extension
- Origin/Market
- International programme
- Favours
- Insured
- Negotiability
- Negotiable
Standard wordings
- market-standard cross-liability/severability of interest clause (separation of insureds condition in international liability and construction policies)
Purpose
In policies covering several jointly insured parties – for example consortium agreements, joint ventures, or construction projects where the main contractor and subcontractors are co-insured – the question arises whether one co-insured can bring a claim against another co-insured under the same policy. The cross liability clause makes clear that cover applies to each insured as if it were the only named insured, so that such claims between co-insureds are, in principle, covered.
Effect and limits
The clause allows the insurer to defend the co-insured against whom the claim is made and settle the loss, without increasing the policy’s overall limit of indemnity. Some insurers narrow this effect through an express cross-suits or insured-versus-insured exclusion, which specifically bars claims between named co-insureds; reviewing this interplay is essential to establishing the actual scope of cover.
Negotiation and practice
In international construction and consortium programmes, policyholders should confirm that no cross-suits exclusion undermines the clause’s effect, and that severability of interest also applies to the application of exclusions, so that each insured is assessed separately. This is particularly relevant for owner- or contractor-controlled wrap-up programmes and consortium agreements with mutual hold-harmless arrangements between project partners.