Several Liability Clause (LMA3333)
The several liability clause (LMA3333) makes clear that each (re)insurer on a Lloyd's or company market contract is liable only for its own underwritten share and is not responsible for the default of any other participating underwriter.
- Clause type
- Condition
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Insurer
- Negotiability
- Market standard
Standard wordings
- LMA3333
Purpose
Policies placed at Lloyd’s and in the London company market are usually carried by several underwriters, each taking a specific share of the risk. The several liability clause (LMA3333, successor to the older LSW1001) makes unambiguously clear that each underwriter’s liability is limited to its own underwritten proportion and is not joint with the other underwriters.
Effect and limits
If one underwriter defaults, for example through insolvency, the shares of the remaining underwriters do not automatically increase; the policyholder therefore bears an independent default risk for each underwriter. For Lloyd’s syndicates, the clause additionally clarifies that, legally, it is not the syndicate as a whole but its individual members (Names) who are liable, each for its own proportion. Signed lines can subsequently adjust the originally written lines and prevail over them in the event of a dispute.
Negotiation and practice
For layered or subscription policies, programme leaders should assess the credit quality and diversification of the participating underwriters, since a default by one is not compensated. Combined with an act-as-one clause for arbitration, the several nature of liability can be prevented from also producing separate, uncoordinated proceedings where several underwriters are involved.