In short. A liability programme rarely fails inside a policy: it fails between policies. The four critical borders are general liability ↔ D&O, product liability ↔ the product itself, product liability ↔ D&O and, the least visible of all, the coexistence of mixed temporal bases. To these must be added the alignment of limits, aggregates and deductibles across lines. In large risks the Spanish Insurance Contract Act is not mandatory: the fit is not guaranteed by the law but by negotiating the wording beforehand, always subject to the terms of each policy.
The commercial insurance market has now seen eight consecutive quarters of rate reductions, with a 6% fall in Europe in the second quarter of 2026, according to the Marsh global insurance market index (July 2026). The figure should be read with care: eight quarters of softening are a snapshot of the cycle, not a guarantee that the ninth will behave the same way.
Even so, it is an infrequent window to do something other than renew more cheaply: redesign the programme. And redesign does not start with the price of each policy, but with what happens at the seams that join them.
A programme is not a collection of policies
Almost all the available content on liability insurance is organised by product: what public liability covers, what D&O covers, what product liability covers. That map is necessary and you have it set out in types of company liability, where we go through the covers one by one.
This article does not repeat that catalogue. It tackles the next problem, which almost nobody addresses: how the whole thing is assembled. Because a company that has correctly bought all seven covers can still have gaps, and it will have them precisely at the points of contact.
The reason is structural. Each policy is drafted from its own logic: it defines its triggering event, its temporal scope, its limit and its exclusions without knowing what the others say. When two separately drafted wordings meet in the same claim, one of three things happens: they overlap and you pay twice, they contradict each other and neither responds, or both respond and you bear two deductibles. All three are avoidable when placing the liability programme, and none of them can be fixed after the claim.
Border 1: where general liability ends and D&O begins
The basic rule is clean. General liability responds to the damage the company causes to third parties through its activity. D&O responds to the personal liability of directors and officers for the way they manage the company, and insures individuals; cover for the company itself exists in some wordings, but it is limited and narrowly defined, subject to the terms of each policy. We develop the point in what D&O insurance covers.
The legal basis of the second lies in the Spanish Companies Act. Its article 236 makes directors liable to the company, its shareholders and its creditors for acts or omissions contrary to the law or the articles of association, or carried out in breach of the duties of office, where there is wilful misconduct or negligence. Article 237 adds the joint and several liability of every member of the body that adopted the resolution or performed the harmful act, with one exception worth keeping in view: those who prove that, having taken no part in its adoption and execution, they were unaware of its existence or, being aware of it, did everything appropriate to avoid the damage or at least expressly objected to it.
Two actions that are not interchangeable also need distinguishing, both of them creatures of Spanish company law. The corporate action under article 238 is brought by the company itself to restore its own assets, with the prior approval of the general meeting. The individual action under article 241 is brought by shareholders or third parties for acts of the directors that directly harm their interests. The claimant, the assets harmed and, in practice, the dynamics of the defence all change.
The grey area sits in neither policy, but in the mixed claim: proceedings brought at once against the company and against the director. It triggers two contracts, possibly with two different insurers, two deductibles and two sets of defence lawyers. The question almost never asked before signing is who takes conduct of the defence and how the common costs are shared between the two policies. If the wording carries no clear allocation clause, that split is negotiated at the worst possible moment: once proceedings have been served.
Do you know which policy would take conduct of the defence if your company and your chief executive were sued together tomorrow? Let us review how your programme fits together.
Border 2: damage to the product itself
Here the gap is opened by the law itself, and it is wider than it looks.
Article 142 of the Spanish consolidated Consumer Protection Act excludes damage caused to the defective product itself from the defective products regime and refers the claimant, for that damage, to ordinary civil and commercial law. Liability under that regime reaches the damage the product causes to people and to other property, not the value of the thing that failed. In programme terms: the cost of replacing, repairing or substituting the defective part is not indemnified by that route and is therefore not covered by a product liability policy. It is a cost the company bears itself.
The same reasoning drags in another block of expenditure that is often assumed to be covered and is not: product recall. Locating the batches, notifying the distribution network, transporting, storing and destroying or reconditioning are costs of the business, not compensation paid to an injured party. They are arranged through a specific recall section, with its own sub-limit and its own wording, subject to the terms of each policy. We deal with this in detail in product liability.
One further point deserves precision, because it is frequently muddled. Article 141.a) provides that a deductible of 500 euros is subtracted from the compensation for material damage; article 141.b) sets the producer's overall liability for death and personal injury caused by identical products with the same defect at 63,106,270.96 euros. These are two rules with different scopes: one operates only on material damage, the other only on personal injury. They are neither added together nor set off against each other. To these must be added the three-year limitation period under article 143 and the extinction of liability ten years after the product was put into circulation, under article 144.
A dated note on current developments, because it may soon be overtaken: Directive (EU) 2024/2853 repeals Directive 85/374/EEC and removes both the deductible and the overall cap, with a transposition deadline of 9 December 2026. As at the publication date of this analysis, August 2026, Spain has not transposed it and the regime of articles 128 and following of the consolidated Act remains in force. Anyone sizing a product programme today over a multi-year horizon is well advised to factor in that change of framework.
Border 3: the product crisis that reaches the board
The third border is the one that costs most, because it is almost never anticipated.
A serious product defect generates not one type of claim but two waves. The first is the predictable one: those harmed claim for the damage suffered, and the product line responds. The second arrives months later and is aimed at the board, for the way the crisis was handled: delay in withdrawing the product, poor disclosure to the market, quality-control or supplier decisions. That second wave is not product damage: it is a claim about management, and its territory is D&O, via the corporate action under article 238 or the individual action under article 241.
The practical problem is one of crossed definitions. D&O policies usually exclude property damage and bodily injury, precisely so as not to trespass on liability insurance territory. If that exclusion is drafted broadly, it may also sweep in the claim about the management of physical damage, which is exactly what the policy was meant to cover. The solution is not to buy more limit, but to review how both wordings define "claim" and "wrongful act", and to check that the D&O damage exclusion does not take the cover for the decision with it.
| Border | What falls into no-man's-land | Which policy covers it | What to review |
|---|---|---|---|
| General liability ↔ D&O | Mixed claim against company and director; sharing the defence | General liability for the company; D&O for the individuals | Cost allocation clause and who takes conduct of the defence |
| Product liability ↔ the product itself | Replacing, repairing or substituting the defective product (art. 142, consolidated Consumer Protection Act) | No liability policy: it is a cost borne by the company | Whether cover for damage to the product itself exists and how it fits contractually |
| Product liability ↔ recall | Tracing, logistics and destruction of the affected batches | Specific product recall section | Sub-limit, definition of costs and the event that triggers the section |
| Product liability ↔ D&O | Claim by shareholders or third parties over the handling of the crisis | D&O | Wording of the property damage and bodily injury exclusion |
| Temporal delimitation | Events before the retroactive date, or claims after expiry | Depends on the basis of each policy | Retroactive date, extended reporting period and continuity |
Beyond those seams there is a hard border that no programme design can move: the benefits surcharge under article 164.2 of the Spanish General Social Security Act, which the law declares uninsurable and which we explain in why the surcharge cannot be insured.
Why are mixed temporal bases the quietest failure?
Because they do not show up at placement, or at renewal, or in a limits audit. They show up on the day of the claim, when there is no room left to act.
D&O is almost always written on a claims-made basis: it responds to claims received during the period, with a retroactive date and, where bought, an extended reporting period. General liability, by contrast, may still be written on an occurrence basis: it responds to events happening during the period, even if the claim arrives long afterwards. The second paragraph of article 73 of the Spanish Insurance Contract Act permits temporal delimitation clauses and requires, depending on the variant, at least one year of subsequent reporting cover or at least one year of retroactive cover — a statutory floor, not the period it is sensible to buy. The full comparison is in claims-made and occurrence.
Where both bases coexist in one programme without anyone having decided it, the gap is structural: the same event can fall inside one policy and outside the other with nothing in the wordings to warn of it. And in large risks the margin for error is wider, because the Spanish Supreme Court has accepted (First Chamber judgment 545/2020 of 20 October) that in that category claims-made clauses are validly incorporated without the formalities of article 3 of the Spanish Insurance Contract Act.
This is where the fact that usually decides D&O design comes in. Article 241 bis of the Spanish Companies Act provides that the liability action against directors, whether corporate or individual, is time-barred after four years from the day it could have been brought. Four years of claim window against a policy that responds only to what is claimed during its period leads to a very concrete operational conclusion: in D&O, the tail matters as much as the limit. A director who steps down today remains exposed for years, and anyone who did not negotiate the extended reporting period will find that out when they are no longer an insured.
Aligning limits, aggregates and deductibles
This is the least glamorous part of a redesign and the part that saves the most claims.
The annual aggregate is shared; the limit per claim is not. Article 27 of the Spanish Insurance Contract Act fixes the sum insured as the maximum indemnity for each claim, but many programmes add an annual aggregate that several sections consume at the same time. If the product line has eroded the primary aggregate in the first half of the year, the excess tower may not find the layer it expected underneath. It is worth checking whether a reinstatement clause exists and whether the excess layer drops down to primary once the primary is exhausted.
Layers must share the same basis and the same dates. A tower in which the excess follows the form of the primary but carries a different retroactive date opens a vertical gap: covered below, uncovered above, for the same event.
Concurrent cover can cost you two deductibles. When one claim triggers two policies, each tends to apply its own. This is negotiable: it can be agreed that only one applies —that of the line leading the claim, or the larger of the two— and that the second is not applied to the same loss.
And do not confuse two deductibles that play on different boards. The statutory deductible of 500 euros under article 141.a) of the consolidated Act operates between the injured party and the producer: it reduces the compensation the third party can demand for material damage. The policy deductible operates between the insured and the insurer: it fixes what you retain before the insurer responds. They coexist and apply at different moments. The detail of this mechanism is in limits, sub-limits and deductibles, and sensible D&O sizing varies a great deal with the size of the company, as we analyse in D&O for SMEs and for large companies.
A well-negotiated programme shows at the claim, not on the premium invoice. Request a border analysis of your programme.
The role of an independent broker
There is one argument that orders everything above and is worth keeping in mind in a large account. The second paragraph of article 44 of the Spanish Insurance Contract Act provides that the mandate of article 2 does not apply to insurance contracts covering large risks — in other words, the Act ceases to be mandatory. The protective formalities of article 3 do not operate, nor does the floor of guarantees available to an ordinary insured. In that category, what protects you is not the law: it is what was read and negotiated before signing.
That is where the work lies. As an independent brokerage registered with the Spanish DGSFP under reference J0140, we act on the client's mandate and not on behalf of any insurer. That means comparing wordings across the whole market —including Lloyd's—, reviewing the seams between lines before the premium of any one of them, negotiating wording and not only price and, when the claim arrives, defending the client's position before the insurer. It is the difference between having policies and having a programme.
Frequently asked questions
Does general liability cover directors' and officers' liability? No. General liability responds to the damage the company causes to third parties. The personal liability of directors and officers for their management, governed by articles 236 and following of the Spanish Companies Act, is covered by a D&O policy, which insures individuals.
What happens to damage to the defective product itself? Article 142 of the consolidated Act excludes it from the defective products regime and refers it to ordinary civil and commercial law: for the insurance programme, replacing or repairing the product that failed is a cost the company bears itself. Recall costs require a specific section, subject to the terms of each policy.
Why does it matter that some policies are claims-made and others occurrence based? Because the temporal delimitation of cover decides whether a claim falls inside cover. If different bases and mismatched retroactive dates coexist in one programme, the same event can fall inside one policy and outside the other.
How long can a director be sued for? Article 241 bis of the Spanish Companies Act sets four years from the day the action —corporate or individual— could have been brought. That is why, in a claims-made D&O policy, the extended reporting period matters as much as the limit.
Should the programme be renewed or redesigned? Renewing keeps the same assembly and only moves the premium. A soft market opens room to negotiate wording, which is where the gaps are. It is worth using it, without assuming the trend will continue.
Sources and legislation
- Royal Legislative Decree 1/2010, consolidated text of the Spanish Companies Act, articles 236 (conditions of liability), 237 (joint and several liability), 238 (corporate action), 241 (individual action) and 241 bis (four-year limitation period).
- Royal Legislative Decree 1/2007, consolidated text of the Spanish Consumer Protection Act, articles 141.a) and 141.b) (deductible and overall cap), 142 (damage to the product itself), 143 (limitation) and 144 (extinction).
- Directive (EU) 2024/2853 of the European Parliament and of the Council on liability for defective products; transposition deadline: 9 December 2026.
- Law 50/1980, the Spanish Insurance Contract Act, articles 3 (limiting clauses), 27 (sum insured), 44, second paragraph (large risks) and 73, second paragraph (temporal delimitation of cover).
- Royal Legislative Decree 8/2015, consolidated text of the General Social Security Act, article 164.2 (uninsurability of the benefits surcharge).
- Spanish Supreme Court (First Chamber) judgment 545/2020 of 20 October, on temporal delimitation clauses in large risks contracts.
- Marsh global insurance market index, July 2026 (commercial insurance rate movements).
This information is for guidance only and does not constitute binding advice. Cover, limits and exclusions are governed in all cases by the particular conditions of each policy. New Brokers Correduría de Seguros, S.L., registered with the Spanish DGSFP under reference J0140.
