Foreign Liability Insurance

Managing Foreign Liability Risk: What U.S.-Based Companies Need to Know When Placing a Foreign Liability Insurance Program

As U.S.-based companies expand operations, supply chains, or client relationships beyond national borders, they are exposed to a host of international risks—legal, regulatory, financial, and reputational. A robust foreign liability insurance program is critical in mitigating these exposures. However, placing and structuring such coverage requires a nuanced understanding of foreign legal systems, local insurance regulations, cultural expectations, and the global business environment.

Here are the key considerations, common pitfalls, and strategic recommendations for U.S.-based companies when placing a foreign liability insurance program.

From sourcing raw materials overseas to opening sales offices in Europe or Asia, U.S. companies increasingly operate across borders. With this growth comes increased exposure to foreign liability claims—ranging from third-party bodily injury in foreign offices to lawsuits under unfamiliar legal systems. Ignoring these risks can be costly and damaging to a company’s global aspirations.

What is Foreign Liability Insurance?

Foreign liability insurance, sometimes referred to as a foreign package policy, protects a company against exposures that arise outside the United States. These may include:

• Commercial general liability (CGL) abroad
• Products liability claims occurring in foreign markets
• Auto liability for employees driving overseas
• Employers’ liability for foreign-based staff
• Kidnap & ransom, political risk, and travel accident coverage

Core Exposures Faced by U.S. Companies Abroad

Some of the most common exposures include:

• Foreign General Liability: Injuries to third parties or damage to property caused by your operations or employees abroad.
• Products Liability: Claims arising from use of your products sold or distributed overseas.
• Foreign Auto Liability: Hired/non-owned auto usage by traveling employees.
• Workers Compensation & Employer Liability: For foreign nationals or U.S. employees on assignment abroad.
• Professional Liability (E&O): For professional services rendered in foreign jurisdictions.
• Reputational Damage: Regulatory fines, media fallout, or local protests tied to operational practices.

Key Considerations in Structuring a Foreign Liability Program

Placing foreign liability coverage is not just about duplicating domestic coverage. Critical considerations include:

• Scope of Overseas Activity: Sales presence vs. owned operations vs. joint ventures
• Jurisdiction-Specific Risk: Countries with high litigation frequency or unique legal systems
• Local Partner Requirements: Some countries mandate minimum coverage for partnerships or contracts
• Employee Risk Profile: Business travel vs. expat assignments vs. local hires
• Claims Handling: Local adjuster access and in-language support

Regulatory and Compliance Concerns

Many countries enforce compulsory insurance laws, which can render non-admitted policies illegal or ineffective. For example:

• China mandates certain local policies
• Brazil and India may not recognize non-admitted claims
• The European Union requires strict GDPR compliance in any data-related liability claims

Failure to comply with local requirements may invalidate coverage or expose the company to fines.

The Role of Admitted vs. Non-Admitted Insurance

Understanding when and where to use admitted (licensed by the local government) versus non-admitted insurance is vital:

• Admitted Insurance: Required in jurisdictions with strict local laws
• Non-Admitted Insurance: May be permitted or used as excess/difference-in-conditions coverage
• Controlled Master Programs: Combine both to ensure uniform global protection while complying locally

Common Foreign Liability Insurance Program Structures

• Foreign Package Policy: A modular U.S.-issued policy with foreign general liability, auto, and voluntary workers comp
• Controlled Master Program (CMP): Global umbrella coordinated with locally admitted policies
• Difference in Conditions (DIC)/Difference in Limits (DIL): Fills in gaps between local policy terms and global standards

Working with an Experienced Broker

Partnering with a broker that specializes in international risk is crucial. A qualified broker will:

• Conduct a foreign risk audit
• Coordinate with local brokers and underwriters
• Tailor programs based on country-specific exposure
• Assist in claims advocacy abroad
• Ensure compliance with U.S. and foreign regulatory bodies

Trust the Foreign Liability Insurance Experts

Contact Simpson-McCrady today to discover how foreign liability insurance can safeguard your operations abroad. Our expertise will help you mitigate risks and protect your financial interests.

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