Financial Loss Extension Clause

Purpose

The base general liability cover under AHB clause 1 responds to financial loss only where it flows from a preceding bodily injury or property damage. Pure financial losses without such a link are not automatically covered and, under AHB clause 2.1, require a specific agreement. The financial loss extension clause closes this gap by extending cover to defined categories of pure financial loss.

Effect and limits

In practice the extension is usually written with its own, considerably lower sub-limit and a separate deductible, because pure financial losses present a different, often harder-to-price risk profile than bodily injury or property damage. Commonly excluded remain contractual penalties, the claimant’s expectation interest itself, and losses arising from a genuinely professional or advisory activity, for which a dedicated professional indemnity policy should be arranged.

Negotiation and practice

The clause suits businesses with occasional, non-advisory financial loss exposure, for example errors in data transmission or delay-related losses. Where the professional activity itself is central to the risk, a dedicated professional indemnity policy with an appropriate limit and extended reporting arrangements should be negotiated instead of, or in addition to, the clause, to avoid coverage gaps for larger claims.