What Is Cross-Liability Coverage?
Cross-liability coverage is a clause in a commercial insurance contract. When an insurance contract covers multiple parties, cross-liability provides coverage for both parties if one makes a claim against the other.
Cross-liability coverage treats the different parties—covered under the same contract—as if they have their own separate policies.
Key Takeaways
- Cross-liability means that one insured party can sue another insured party when both parties are under the same policy.
- Cross-liability clauses are typically standard in a commercial general liability policy.
- However, some policies may exclude certain situations—one company director suing another, for example, or lawsuits brought by a company against its directors.
Understanding Cross-Liability Coverage
When two covered parties secure cross-liability coverage, one insured party can sue another insured party even when both parties are under the same policy. Standard liability insurance typicallyincludes a cross-liability clauseknown as a "Separation of Insureds" agreement.
An insurance contract that includes cross-liability coverage will typically have phrasing similar to this: “Every insured claimed against under this policy will be treated, at the time of the claim, as if they were the only insured under the policy.”
Commercial insurance contracts typically have cross-liability coverage. The clause allows the different parties included in the contract to be treated separately in certain situations (while in other situations, they are treated the same).
In acase wherethe parties are treated separately during a claims suit, they are not all given a separate coverage limit. This difference means that an aggregate limit still applies to the total coverage provided by the policy. Business liability insurance policies may exclude coverage for intercompany lawsuits, thus eliminating the "Separation of Insureds" feature in some cases.
For example, the founding partners of a law firm may sue each other for damages or injuries that each party insists that the other caused. Companies that want to insure against this type of risk will have to purchase an intercompany product suit exclusion.
Many commercial general liability insurance policies already have language addressing cross-liability coverageand do not have exclusions for this type of event. Since no exclusion is involved,a separate endorsem*nt is unnecessary. However, some liability policies contain insured-versus-insured exclusions that effectively eliminate cross-liability coverage.
Example of Cross-Liability Coverage
Suppose there is an automobile company that shares a liability policy with its subsidiaries, which manufacture various parts. The parent company is responsible for assembling the vehicle, while the subsidiaries make thecomponents. Because of a faulty part in one of the cars that the automobile company manufactures, a number of road accidents occur. This results in claims made against the automobile manufacturer. Under the Separation of Insureds feature of the cross-liability coverage policy, the parent company sues one of its subsidiaries.
The cross-liability endorsem*nt is one reason general liability insurance is so importantto protect the financial assets of anybusiness.
FAQs
For example, if an insured wants to sell their product at a retail store, the store may require the insured add the store as an additional insured on their policy so they're protected should the insured's product cause property damage, bodily injury, or some other type of financial loss to an end user.
What is an example of cross liability insurance? ›
Example of cross-liability coverage:
A family owns two cars and both cars are insured by a policy which includes cross-liability car insurance. During a parking maneuver, the husband's vehicle collides with his wife's vehicle in the driveway and causes serious damage.
What is cross coverage insurance? ›
Cross-liability coverage is coverage in connection with a suit brought against an insured by another party that has insured status under the same policy.
Why do people get cross liability insurance? ›
Cross liability coverage has two basic benefits: ➢Insurance applies separately to each insured against whom claim is made and each insured is entitled to a separate defense. Thus, city is entitled to coverage even if another insured has done something to cause the insurer to deny their coverage.
What is the cross liability coverage endorsem*nt? ›
A cross-liability endorsem*nt is an endorsem*nt that alters or clarifies the application of a liability policy to cross-liability claims.
What is a cross-claim in insurance? ›
A cross-claim is a claim brought by a plaintiff against a co-plaintiff, or by a defendant against a co-defendant. The Responsive Pleading to the counterclaim may include a cross-claim.
Is cross liability the same as waiver of subrogation? ›
Policies of insurance can include a provision that acknowledges that each co-insured is separate and distinct and expressly waive any rights an insurer would otherwise have to pursue a co-insured in respect of loss or damage it indemnifies. These are known as “cross liability” and “waiver of subrogation” clauses.
Why do we use cross coverage? ›
The cross-coverage allows having a cross product (i.e. cartesian product) between two or more variables or coverage points within the same covergroup. In simple words, cross-coverage is nothing but a set of cross-products of variables or coverage points.
What does cross covering mean? ›
Cross cover basically means that you have several members of staff who are trained in each other's roles to a certain degree and are able to cover each other if needs be. Of course, this isn't a common occurrence and it is something which simply happens if an emergency happens.
What is cross cover in medical terms? ›
Cross-cover is when physicians cover for a primary team's patients in the hospital setting, usually on afternoons, evenings, and weekends. These periods of cross-cover are marked by the covering physicians continuing the plan set forth by the primary medical team.
Should I get liability or full coverage car insurance? Typically, it is advisable to purchase full coverage car insurance. Liability insurance will not pay for damages to your own vehicle after an accident where you are at fault. It will also not cover damages due to theft, vandalism or acts of nature.
Why do insurance companies deny liability? ›
Companies will refuse to approve your request for compensation if your claim lacks support and evidence. The insurer may justify its denial by claiming that it believes your injuries were pre-existing at the time of the accident or that your own conduct made the injuries worse.
Why should I have public liability insurance? ›
Public liability insurance covers the cost of claims made by members of the public for incidents that occur in connection with your business activities. Public liability insurance covers the cost of compensation for: personal injuries. loss of or damage to property.
What is symbol 1 liability coverage? ›
Symbol 1 is “any auto.” The auto does not have to be declared and when it was purchased makes no difference. With symbol 1, the liability claim is covered. Symbol 1 covers "any auto" (owned, borrowed, rented, hired) for liability.
What is the limit of liability endorsem*nt? ›
An OLLE is a provision in an insurance policy that “sets the upper limits of [an insurer's] liability.”1 Other names for these types of policy provisions include Loss Occurrence Limit of Liability Clause Provisions (“LLOLE”) and Scheduled Limit of Liability Endorsem*nts.
What is an endorsem*nt insurance example? ›
Think of it this way: If your standard homeowners, condo or renters insurance policy is an ice cream sundae, a scheduled personal property endorsem*nt is something you add to it — whipped cream, sprinkles or a cherry on top. Like the sundae, your ring, or whatever you added the endorsem*nt for, has increased coverage.
What is strict liability insurance example? ›
Examples of strict liability
Situations that involve strict liability include: If you make or sell defective products that cause harm because of design flaws, manufacturing defects or inadequate warnings. If you deal with hazardous materials or chemicals that cause damage due to leaking or spills.
What is an example of umbrella liability insurance? ›
Examples include the cost of liability claims due to: Someone tripping over a crack in the sidewalk of your rental property and suing you for damages. Your tenant's dog* biting someone and you being held responsible for the injuries.
What is common carrier liability insurance? ›
Common carrier liability insurance includes insurance against loss resulting from liability of a common carrier for accident or injury, fatal or nonfatal, to any person but does not include liability or workers' compensation insurance. Ca. Ins. Code § 110.
What are cross suits? ›
A cross-suit is a legal claim made by one defendant or plaintiff against another defendant or plaintiff in the same case. This claim must relate to the subject of the original claim or counterclaim. It is also known as a cross-claim or cross-action.
