What Does Joint and Several Liability Clause Mean?
A joint and several liability clause is a provision stating that two or more parties share liability for a particular act or obligation. In such circumstances, any or all of the parties may be sued for damages if a plaintiff has a cause of action against them, and any or all of the parties may be required to pay damages, if awarded to the plaintiff. In terms of insurance, liability insurance exists to provide financial protection against liability suits.
Insuranceopedia Explains Joint and Several Liability Clause
Joint and several liability clauses work in the favor of plaintiffs in that they allow them to maximize damages by suing the wealthiest party or all of the parties that can be held liable. This can be a very significant distinction if one of the parties cannot pay the full damages. The reason is because the other liable party or parties could then be forced to continue paying the damages.
Often, businesses that work together, such as a supplier and a shipper, might agree a joint and several liability clause. In this way, they share liability and spread the risk out as well.