Definition:Severability
📋 Severability is a contractual provision found in many insurance policies—particularly directors and officers (D&O), errors and omissions (E&O), and other liability lines—that treats each insured person's application statements and obligations as independent from those of every other insured under the same policy. In practical terms, if one insured made a material misrepresentation on the application, severability prevents the insurer from voiding coverage for innocent co-insureds who had no knowledge of or involvement in that misrepresentation.
⚙️ The clause operates by directing the insurer to evaluate each insured's knowledge, statements, and conduct separately when determining whether grounds exist to rescind or deny coverage. Consider a D&O policy covering an entire board of directors: if the CEO concealed a prior securities claim on the application, a severability clause would protect the remaining directors from losing their coverage because of the CEO's dishonesty. Some policies offer "full severability," which shields all innocent insureds including the corporate entity, while others limit severability to individual insureds only, leaving the named insured organization exposed to rescission based on any officer's misstatement.
💡 For risk managers and brokers negotiating management liability programs, the scope of the severability clause can be one of the most consequential coverage distinctions in the policy. A narrow or absent severability provision introduces the risk that an entire tower of coverage collapses because of one individual's bad act—a scenario that can leave dozens of innocent executives without defense funding in a shareholder class action or regulatory investigation. Careful review during the placement process ensures the clause is broad enough to align with the organization's governance and exposure profile.
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