Foreign Liability Insurance

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