A limit of liability is a central component of a policy and an important consideration for an organisation and its management. Having enough coverage when it’s required can mean the difference between effective protection and potential ruin. Despite its significance, the process of selecting an adequate limit of liability remains part art, part science.
In this article, we will explore the concept of a limit of liability within the context of the following coverages:
- Directors and officers liability insurance
- Employment practices liability insurance
- Management liability insurance
- D&O insurance for nonprofits
You may also find that similar concepts apply to a broad range of financial lines insurances, such as professional indemnity insurance, cyber insurance, and even crime insurance to a certain extent. Keep in mind, however, that each policy is strictly interpreted according to its own terms and conditions.
Contents
1 Limit of liability: A definition
2 Components of a limit of liability
3 The challenges of a shared limit of liability
4 Selecting a limit of liability
5 How much coverage is enough?
6 Constructing a large limit of liability
7 How do defence costs interact with the limit of liability?
8 Policy lifecycle and the limit of liability
9 Emergency provision: An additional limit of liability
10 Limit of liability: An example
11 Conclusion
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