Foreign or Domestic?

Valynda Murphy
Insurance Experts' Forum, January 2, 2014

One of the most common inquiries we receive from agents and brokers is, "How do domestic and the international general liability (GL) policies work together to cover a client’s foreign sales exposures?"

The technology boom has afforded companies the ability to operate seamlessly across the globe. While this has created an ease of doing business we all enjoy, it leaves companies exposed to potential gaps and duplications in their insurance coverage.

The typical domestic general liability policy provides coverage for U.S. suits for products, as well as completed-operations coverage for products exported to overseas markets where a covered occurrence takes place. However, there are limitations:

  • Products must be manufactured or sold in U.S.
  • Suits for covered claims must be brought into the U.S. for coverage and defense costs to apply
  • The insured must have the appropriate Bureau of Industry and Security (BIS) license for exportation of goods to certain countries subject to economic sanctions

By knowing where there may be gaps in coverage, you can help your IT clients mitigate and potentially eliminate future claims. This starts by recognizing their foreign exposures and understanding the differences between their domestic and international coverages.

It's important to secure international coverage to avoid gaps when any product that could cause claims is manufactured and sold overseas; and when products and completed-operations suits for covered occurrences are likely to be brought overseas. The international GL policy should include all foreign exposure bases. These include: export sales from the U.S.; sales from products manufactured overseas; premises/operations exposure for physical locations overseas; and employee trip/travel exposures.

By taking the time to establish a savvy international convergence strategy, you will:

  • Eliminate duplicate coverages from applying under two policies for export sales exposure
  • Eliminate the possibility of insureds being billed twice for the same exposure rate under two different policies
  • Eliminate any gaps in coverage for non-products and completed-operations claims that would not be covered under domestic GL;
  • Represent premium cost savings to insureds as foreign GL rates typically are much lower than domestic GL rates
  • Eliminate potential “stacking of limits” clarifying the intent of which policy is supposed to cover foreign exposures — especially when foreign and domestic coverages are placed with different carriers
  • Reduce the producer’s E&O exposure

Because the complexity of risks and exposures will continue to evolve rapidly, there is a critical need to reduce the complexity of solutions to avoid gaps and duplication of coverages. If you have any questions about how to do this most effectively, contact your underwriters — they can ensure your IT clients have the appropriate protection. 

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