Is the Territory Big Enough for Both You and Your Client?

Policy coverage territories, although not actually shrinking, may seem increasingly small in the current global economy.  If your client does business outside the United States, then their liability policy should respond to claims wherever they are brought.  Many do not.  Many liability policies still limit their coverage territories to claims brought in the U.S., its territories and possessions, and Canada.


Why is this important?  It’s probably not for clients who only provide services locally, such as medical care.  But if your client is a U.S. tech firm exporting wares and expertise or a media company with broad distribution, or an internet company interacting with persons in other nations, they have international exposures. 


One well-known example was Yahoo! being sued in France to curtail access to Nazi memorabilia, a case Yahoo! is still litigating years later.  When it is to their advantage, plaintiffs choose their home court, litigating in their own country.  (On occasion it may be more beneficial for a plaintiff to bring their case in the United States, where they may have a better case and where damage awards tend to be higher.)  When you consider this inclination, the softening trade borders and the expansive reach of the internet, international exposures are on the rise for U.S. companies.


We randomly surveyed 13 professional liability policies (just the base forms) to find out what insurers are doing to address this growing international exposure.  Six of the forms we evaluated are only responding to cases brought in the U.S., its territories and possessions and Canada.  Five forms we evaluated are crafted to cover claims wherever brought.  And in our favorite category, two forms offer coverage for claims brought anywhere in the world, unless it violates  U.S. law or trade sanctions. 


Why is this last category our favorite?  It’s not just because it’s the approach we take on our own policy forms.  We did it this way because we knew we wanted to try to meet the needs of global business, but we also know we’re not going to cover a claim if it’s against the law.  Most companies probably wouldn’t violate the law in order to provide coverage either, but we wanted our buyers to know that up front.


So, take a look at the coverage territory on your client’s liability policy.  If it isn’t big enough for global business, it may be time to consider expansion.