For Subscribers

Going Separate Ways In a lawsuit, you and an employee could be sent down different paths.

By Jacquelyn Lynn

Opinions expressed by Entrepreneur contributors are their own.

Consider this scenario: One of your employees assaults acustomer, and that customer sues the employee, the company and you.But your liability coverage excludes intentional bad acts. Doesthis mean you are on the hook for legal fees and damages? Notnecessarily, says attorney Richard Zevnik, an associate with BergerKahn in Irvine, California.

Most business policies contain a "severability" or"separation of insureds" clause, which means that ifthere are multiple defendants in a lawsuit, the insurance companycould deny or limit coverage on one and not on others. So you andthe company could be covered for vicarious liability, but theemployee who committed the assault may be denied coverage.

"You've got to analyze your coverage under the policyas to each insured who has been made a defendant in a lawsuit as ifthey were the only insured," says Zevnik.

A similar clause is standard in directors and officers (D&O)policies. The language protects innocent insureds if anotherdirector or officer made a misrepresentation on the application orengaged in wrongful conduct that would result in a denial ofcoverage.

Considering that most lawsuits these days include multipledefendants, a clear understanding of severability will help youmanage your risk more effectively.


Jacquelyn Lynn is a freelance business writer in Orlando,Florida.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Science & Technology

The Hidden Dangers of Using Generative AI in Your Business

Rushing to adopt generative AI can derail your business. Here's what leaders need to know.

Science & Technology

We Spent a Decade Building Virtual Worlds — What We Discovered Could Reshape the Future of Business

What we learned about scale, AI and ownership when we tried to connect thousands of people in real time.

Growing a Business

This One Leadership Move Will Transform Your Team's Loyalty and Performance

Most leaders focus on technical skills, but this lesser-known trait quietly shapes team loyalty, engagement and long-term performance.

Leadership

Why the Most Powerful CEOs Today Lead With Authenticity, Not Silence

The most effective CEOs today build trust and brand value by leading with authenticity and personal conviction.

Side Hustle

7 Ways Ecommerce Is Helping People Rebuild Their Lives

Ecommerce is more than just a business model. For many, it's about finding stability, freedom and a way to feel in control.