Financial Loss: What is it and When is it Covered?

The IUA’s Liability Underwriters’ Group (LUG) created a working party to consider the issues arising from the provision of financial loss coverage as an extension to traditional general liability policies. Financial loss extensions are becoming increasingly common, despite the fact that there are differing interpretations of what financial loss is - both legally and as commonly understood by market practitioners.

Given the paucity of market guidance on this issue LUG felt that a report highlighting the key issues arising from the provision of financial loss would be beneficial to market practitioners. The working party, which received significant legal input and advice from Stuart White (Partner at RPC), drafted the below publication, ‘Financial Loss. What is it and when is it covered?’.

The report provides a clearer understanding of the law and the practical implications of providing this extension of cover. It is split into five key sections:

1. Legal Review – What is financial loss and how does liability for it arise? This includes a review of the key legal principles and cases related to financial loss and recovery via the tort of negligence, contractual liability and statutory liability. As an aid to further reading, in the electronic version of the report we have included hyperlinks to the judgements and statutes of many of the cited cases and legislation.

2. Coverage – When is financial loss covered? This section assesses a range of commonly used public liability and products liability policies insuring clauses and exclusions and the interaction with the use of financial loss extensions.

3. A review of financial loss in a number of other jurisdictions.

4. Summary and outlook.

5. Annex – Frequently Asked Questions

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