Series Loss Clause

Purpose

AHB clause 6.3 provides that several insured events occurring during the policy period are treated as a single loss occurrence, deemed to have taken place at the time of the first such event, where they arise from the same cause, from similar causes with an inherent factual and temporal connection, or from the delivery of goods sharing the same defect. The clause bundles systematic or recurring loss sources – for example a defective production run – for insurance purposes, rather than settling each individual loss separately.

Effect and limits

Aggregating losses into a single occurrence means only one limit of indemnity and one deductible apply, regardless of the number of claimants or individual losses affected. The date of the first loss in the series determines the policy year and the applicable terms and limits, which can matter significantly where conditions changed between the individual events.

Negotiation and practice

In larger industrial, product liability and D&O programmes, the definition of the “inherent connection” is frequently negotiated, since a broad interpretation can force several otherwise independent loss events into a single, potentially insufficient limit. Policyholders with significant series-loss exposure, such as serial manufacturers, should insist on a precise definition and an adequately sized annual aggregate limit.