A per-claim liability limit restricts the amount of damages recoverable for each individual breach or incident, separate from any aggregate cap. For example, a clause might state that liability for any single claim cannot exceed $100,000, even if the actual harm is $500,000. This differs from an aggregate cap because multiple claims can each reach the per-claim limit (so ten claims could theoretically total $1 million if there's no aggregate cap), but each individual claim is capped independently. Per-claim limits are useful for allocating risk in contracts with many potential failure points or where losses from individual incidents are difficult to predict. They encourage parties to manage claims efficiently and discourage exaggerated damage claims. However, they can be unfair if a single breach causes catastrophic harm that exceeds the per-claim limit, leaving the injured party significantly undercompensated.
When setting a per-claim limit, consider the nature of potential breaches and the likely magnitude of harm from a single incident. Ensure the per-claim limit is high enough to cover reasonably foreseeable damages from a typical breach, and coordinate it clearly with any aggregate cap (e.g., "per-claim limit of $250,000, aggregate cap of $2 million"). Negotiate carve-outs for claims involving willful misconduct, fraud, or breach of confidentiality obligations, which should not be subject to per-claim limits. Document examples of what constitutes a "claim" to avoid disputes about whether multiple related incidents count as one claim or several, and consider whether the limit applies before or after insurance recovery.
Frequently Asked Questions
What does this clause mean in simple terms?
A per-claim liability limit restricts the amount of damages recoverable for each individual breach or incident, separate from any aggregate cap.
Why should I care about this clause?
For example, a clause might state that liability for any single claim cannot exceed $100,000, even if the actual harm is $500,000.
What are my options?
This differs from an aggregate cap because multiple claims can each reach the per-claim limit (so ten claims could theoretically total $1 million if there's no aggregate cap), but each individual claim is capped independently.
How does this affect small businesses?
Per-claim limits are useful for allocating risk in contracts with many potential failure points or where losses from individual incidents are difficult to predict.