A limit of indemnity is the maximum amount available under a liability insurance policy, subject to the wording, exclusions and other policy terms.

The term is commonly used in policies such as:

• Professional Indemnity
• Public Liability
• Management Liability
• Cyber Insurance

How can the limit operate? #

A policy may have:

• Any one claim limit: The maximum available for an individual claim
• Any one occurrence limit: The maximum available for an individual occurrence
• Aggregate limit: The maximum available across specified claims during the policy period
• Sub-limit: A lower limit applying to a particular type of loss, claim or expense

For example, a policy may provide a $2 million limit for any one claim with a $4 million aggregate.

What about defence costs? #

Defence costs can be:

• Included within the limit
• Payable in addition to the limit
• Subject to a separate or additional limit

This varies between policies.

Where defence costs are inside the limit, amounts spent defending a claim can reduce the remaining amount available for an insured settlement or judgment.

What are reinstatements? #

Some policies provide one or more reinstatements of the aggregate limit following a claim.

The number, amount and operation of any reinstatement depend on the wording.

The limit of indemnity is also different from the insurance excess.

A Certificate of Currency or schedule may show the headline limit, but the wording and endorsements determine how it actually operates.

Contact our team if you need help reviewing a policy limit or contractual insurance requirement.