Key takeaways
- Jurisdiction refers to the legal system or law which under which you may be required to defend yourself against a claimant seeking redress
- Territorial limits refers to the geographical boundaries of the cover (where your customer is based, not where you provide the product or service from)
- Specifying UK law and jurisdiction for disputes under contracts with your clients will manage your risk to defend yourself in a overseas court
When faced with insurance clauses that make reference to Jurisdiction and Territorial Limits, it's important to make sure you understand the difference and have the correct business insurance to cover your activities.
Law and Jurisdiction
For professional indemnity insurance and most other covers it is commonly accepted the USA and Canada carries a high degree of risk because the legal system is more litigious and can award damages higher than most other legal systems.
Territorial limits
For example, a policy may specify that cover is valid across Europe but not beyond. If an insured event occurs outside of these specified boundaries, the policyholder may not be covered.
In summary, jurisdiction addresses the legal framework which resolves disputes with your clients, while territorial limits defines the geographical scope of cover
What jurisdictional limits do we need?
Extending your Jurisdictional or Territorial Limits will often incur an increase in annual premium. Many policies will exclude jurisdictional cover in locations they deem to be particularly litigious, such as the USA and Canada. Insurers will often be willing to include this cover if requested, however they will typically request copies of the contracts used for review.
Capping your liability under contract to a multiple of the contract value and excluding consequential loss is typically sought by insurers - this provides them with the first line of defence when disputing allegations made against you. It's important to note that awards made by the courts can exceed any agreed caps under contract.
US jurisdictional cover in insurance is an important consideration when engaging with American clients - extending your cover can significantly impact the annual cost
Why US jurisdictional cover matters?
Conclusions
- Specifying UK law and jurisdiction for disputes under your contracts with clients will manage your risk to defend yourself in a US court
- The US's litigious legal system, high legal costs and awards make this cover essential for businesses whereby disputes could be held within the US
- Policies tailored for UK businesses often exclude the US and Canada to manage premium costs, so businesses need to specially request the cover is required
- Legal disputes under US jurisdiction can be costly and time-intensive, if you contract with your client under US law you are exposing yourself to higher insurance costs
About the author
Ryan Nevin is an Account Broker at Get Indemnity™ - he is an ambitious professional who is currently studying towards being a Chartered Insurance Broker.