severability of interests
Definition
Severability of interests means that when multiple parties are covered under the same insurance policy, the policy treats each person or business as if they have their own separate coverage. So if one insured party does something wrong, it does not automatically cancel out or reduce the coverage available to the other insured parties on the same policy.
Example
If your business and a business partner are both listed on a general liability policy and your partner commits fraud, the insurance company cannot use your partner's bad acts as a reason to deny your legitimate claim.
Watch Out
Always confirm that your shared business insurance policies include a severability of interests clause, because without it, one co-insured person's actions could unintentionally put your own coverage at risk.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.