Joint And Several Liability Clause

What Does Joint And Several Liability Clause Mean?

A joint and several liability clause is a provision that states two or more parties share liability for a specific act or obligation. In such cases, any or all of the parties can be sued for damages if a plaintiff has a cause of action against them. Likewise, any or all of the parties may be required to pay the full amount of damages if awarded to the plaintiff. In the context of insurance, liability insurance provides financial protection against such liability claims.

Insuranceopedia Explains Joint And Several Liability Clause

Joint and several liability clauses benefit plaintiffs by allowing them to maximize their potential recovery by suing the wealthiest party or all parties that can be held liable. This distinction becomes significant if one party is unable to pay the full damages, as the remaining liable party or parties may be required to cover the shortfall. Because the defendant with the deepest pockets can end up paying the entire judgment, many businesses carry a commercial umbrella policy to extend their liability limits above what their standard policies pay out.

Businesses that work together, such as a supplier and a shipper, may agree to a joint and several liability clause to share liability and distribute the risk more evenly. Most companies in this position already carry general liability insurance to respond to third-party bodily injury and property damage claims, which is the kind of coverage typically triggered when a joint and several clause is enforced.