When it comes to liability and casualty insurance, two terms often create confusion:
- Territorial Limit
- Jurisdictional Limit
They may sound similar but serve very different purposes. If misunderstood, they can lead to unexpected coverage gaps—especially for businesses with overseas projects or clients.
In Malaysia, it’s very common to see insurance policies with worldwide territorial limits (excluding USA/Canada) but jurisdictional limits restricted to Malaysia only. Let’s break this down clearly with examples relevant to Malaysian businesses.
1. Territorial Limit: Where the Incident Happens
The Territorial Limit specifies the geographical area where an incident must occur for the insurance policy to respond.
Example:
A Malaysian engineering company is working on a project in Singapore. If the policy’s Territorial Limit is “Malaysia only”, any claims arising from work done in Singapore would not be covered. The company would need a Territorial Limit of “Worldwide excluding USA/Canada” or one that specifically includes Singapore for coverage to apply.
2. Jurisdictional Limit: Where the Claim Can Be Filed
The Jurisdictional Limit determines the legal system where claims or disputes must be handled. Even if the incident is covered under the Territorial Limit, your policy might not respond if the lawsuit is filed outside the Jurisdictional Limit.
Example:
Using the same company, imagine a claim is filed in the Singapore High Court. If the policy has a Jurisdictional Limit of “Malaysia only”, the insurer will not cover the claim because it is outside Malaysian legal jurisdiction—even though the Territorial Limit included Singapore.
3. Common Issue in Malaysia: Mismatched Limits
Many Malaysian liability and casualty policies provide worldwide territorial limits (excluding USA/Canada) but limit jurisdiction to Malaysia only.
This means:
Incidents overseas may be covered……but only if legal proceedings are brought in Malaysian courts.
Worked Example:
- Territorial Limit: Worldwide excluding USA/Canada
- Jurisdictional Limit: Malaysia only
- Incident: Claim from a project in Dubai, lawsuit filed in Dubai courts.
The insurer will likely deny the claim because the proceedings are outside Malaysia.
4. Why This Matters for Malaysian Businesses
With more Malaysian companies expanding across Asia and beyond, jurisdictional limits can become a major issue:
- Construction firms with regional projects.
- Manufacturers exporting goods worldwide.
- Service providers engaging overseas clients.
If your operations extend beyond Malaysia, review both limits carefully to avoid unexpected exclusions.
5. How to Avoid Coverage Gaps
Review your policy wording before renewal.
Discuss your needs with your insurer or broker—don’t assume worldwide territorial cover equals worldwide jurisdictional cover.
Request broader jurisdictional limits if your work involves cross-border risks.
At Minaris Risk Management, we regularly advise businesses on these issues to help them align their coverage with actual operational needs.
Conclusion
- Territorial Limit = Where the incident must occur for the policy to respond.
- Jurisdictional Limit = Where legal proceedings must be filed and handled.
Both need to match your business activities to ensure comprehensive protection.
In Malaysia, many liability and casualty policies give worldwide territorial cover but restrict jurisdiction to Malaysia only, so always check whether this matches your business requirements before you face a claim.
Jayadarshiniy Sankar is a Senior Insurance Advisory Manager with a background in law and over 5 years of experience in professional indemnity and general insurance. She specializes in regulatory compliance and client solutions, delivering tailored coverage with prompt, results-driven support while actively educating clients through industry content and guidance.