Cross Liability
What Does Cross Liability Mean?
Cross liability is a feature commonly found in insurance contracts, particularly within commercial policies. This provision ensures that the insured is covered against claims made by another party who is also insured under the same contract.
This feature is especially important because many commercial liability policies include landlords, vendors, or customers of the insured as additional insureds, providing them with protection under the policy.
For instance, if an insured individual wants to sell their product at a retail store, the store may require that the insured add it as an additional insured on their policy. This ensures that the store is protected if the insured’s product causes property damage, bodily injury, or any other type of financial loss to an end user. A cross liability clause allows for coverage under the policy if the retail store sues the insured, and vice versa.
A cross liability clause is typically included as standard in most Commercial General Liability (CGL) policies to delineate coverage among insured parties. However, in some umbrella liability or professional liability policies, there may be exclusions for insured-versus-insured disputes that negate cross-liability coverage.
Insuranceopedia Explains Cross Liability
A cross liability clause in a commercial liability insurance policy allows insured parties to be protected under the same policy against claims made by other parties also insured under that policy. Essentially, this provision enables the policy to apply separately to each insured party, treating them as if they had their own independent insurance. However, the total coverage remains collective for all insured parties, meaning the aggregate limit still applies to the overall coverage provided by the policy.
For example, if a burger chain partners with a condiment supplier and legal complaints arise against the burger chain for food poisoning, an investigation may reveal that the condiments were the source of the health issues. If both the burger chain and the supplier are insured under the same policy with a cross liability provision, the burger chain can file a claim against the supplier, who would also be protected under that policy.
For the purposes of the claim, the two parties are treated as if they had separate policies, even though they are covered under a single contract.
There are exceptions where underwriters may include an insured-versus-insured exclusion in the policy, which eliminates coverage in certain situations, such as internal company disputes or lawsuits between the company and its directors.
Discussions about cross liability often also involve severability of interest clauses, which are typically present in most commercial general liability insurance policies.
