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📜 '''Severability of interests''' is a policy provision — sometimes called a "separation of insureds" clause — that treats each named or additional [[Definition:Insured | insured]] under a single insurance policy as though they hold a separate, independent policy, except with respect to the overall [[Definition:Policy limit | policy limits]]. Found most commonly in [[Definition:Commercial general liability (CGL) insurance | commercial general liability]], [[Definition:Directors and officers (D&O) insurance | directors and officers]], and [[Definition:Professional liability insurance | professional liability]] policies, this clause ensures that the conduct, knowledge, or actions of one insured do not automatically prejudice or void coverage for another insured under the same contract.

🔍 In practice, severability operates by preventing an insurer from applying a coverage defense against all insureds simply because it applies to one. Consider a [[Definition:Directors and officers (D&O) insurance | D&O]] policy covering an entire board: if one director committed fraud, a severability clause protects the remaining innocent directors from having their coverage vitiated by the wrongdoer's actions. Without this provision, the [[Definition:Insurance carrier | insurer]] could argue that the fraudulent conduct — or even the knowledge of it — taints the entire policy, leaving all directors exposed. The precise scope of severability varies by jurisdiction and [[Definition:Policy wording | policy wording]]; some policies apply it only to [[Definition:Exclusion | exclusions]], while others extend it to [[Definition:Warranty | warranties]], [[Definition:Representation | representations]], and [[Definition:Condition | conditions]] as well. Courts in the United States, the United Kingdom, Australia, and Canada have all addressed the boundaries of severability, sometimes reaching different conclusions depending on the specific language used.

⚖️ For [[Definition:Insurance broker | brokers]] and risk managers negotiating policy terms, the presence and breadth of a severability clause can be a decisive factor in the quality of coverage obtained. In complex corporate structures where multiple entities or individuals are insured under a single program, severability protects the innocent majority from the failures of the few — a principle that aligns with fundamental fairness but that insurers must carefully balance against [[Definition:Moral hazard | moral hazard]] and [[Definition:Adverse selection | adverse selection]] concerns. The clause is particularly scrutinized in [[Definition:Claims | claims]] arising from corporate scandals, [[Definition:Employment practices liability insurance (EPLI) | employment practices disputes]], and [[Definition:Cyber insurance | cyber incidents]] where knowledge of wrongdoing may be unevenly distributed among insureds. Ensuring robust severability language is a hallmark of thoughtful policy placement.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Directors and officers (D&O) insurance]]
* [[Definition:Commercial general liability (CGL) insurance]]
* [[Definition:Exclusion]]
* [[Definition:Policy wording]]
* [[Definition:Additional insured]]
* [[Definition:Moral hazard]]
{{Div col end}}

Definition:Severability of interests - Revision history

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