The Cost And Risk Of International Liability

A razor is sold in France, where the customer is injured. The customer travels to the United States and sues. Is there coverage under the U.S. or foreign policies? No, the U.S. policies exclude it because the product was neither made nor sold in the United States. Foreign policies exclude U.S. suits.

A razor is sold in France, and the customer takes it to the U.S. where he or she is injured and then returns to France to file suit. Is there coverage under the U.S. or foreign policies? No, the U.S. policies exclude it because the product was neither made nor sold in the United States. Foreign policies exclude suits arising out of U.S. occurrences.

A razor is sold in France, and the customer takes it to the U.S. where he or she is injured and files suit. Is there coverage under the U.S. or foreign policies? No. The U.S. policies exclude it because the product was neither made nor sold in the United States. Foreign policies exclude U.S. suits.

While the above scenarios may seem unlikely, there is evidence that these types of claims have taken place. Fortunately, the number of claims has been few. Insurers are usually amenable to endorsing their contractors general liability insurance to include this coverage for an additional premium.

Foreign insurers are more likely to insure exposures of foreign suits as a result of U.S. occurrences because they usually have the facilities overseas to adjust losses. It is more difficult to have the U.S. insurers cover the exposure of U.S. suits as a result of foreign sold products. Foreign insurers may also provide coverage for U.S. suits, but it tends to be more expensive than the coverage for foreign suits. In addition, foreign insurers will often not provide coverage for U.S. suits unless they have an opportunity to write the domestic business.

This leads us to the second approach for covering the territorial gap in liability policies - creating a global policy. While many people quickly embraced the concept of the global policy for proper exposures, few have been convinced in the casualty area. Since most foreign policies are based on the U.S. policy form, this apprehension is usually unwarranted. What is required is a global insurer who can write the coverage competitively and has the capabilities of adjusting foreign losses. Both can be difficult to find because:

1. Foreign programs are usually less expensive than domestic policies (due to the decreased amount of litigation overseas), which limits the amount of interest in providing this coverage.

2. The number of insurers that have the capabilities to issue policies overseas is very limited.

3. The number of insurers that have the capabilities to adjust losses overseas is very limited, though this can be solved by using a third-party adjustment firm with international capabilities.

In conclusion, covering the gaps between domestic and foreign liability policies is an issue which needs to be addressed by the insurance community. Insured's and their brokers need to review their policies to determine which gaps they are currently self-insuring and whether these are acceptable burdens.

Current policy forms do not appropriately cover the exposures at risk, and some insurers may wish to take the initiative and modify their domestic and foreign policies to provide seamless coverage, thereby developing more competitive products. Finally, additional consideration should be given to the development of global liability policies, eliminating these gaps in coverage.