Exclusion clause

Category: Policy structure · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~4 min read

Definition

An exclusion, or exception, is a policy term that carves something out of cover. It may remove a peril, an activity, a category of loss, a period, a place or a class of claimant. Exclusions sit in a dedicated section in most wordings, but they are also found inside definitions, inside extensions, in the schedule and in endorsements, and a term does not have to be labelled an exclusion to operate as one. The starting point in reading any policy is that the insuring clause and the exclusions have to be read together; neither means anything on its own.

Exclusions, conditions and warranties

Three different mechanisms are often confused. An exclusion defines what is not insured, so a loss falling within it was never covered. A condition imposes an obligation on the insured, and the consequence of breach depends on whether it is a condition precedent to liability, a condition precedent to the contract, or a bare condition sounding only in damages. A warranty is a promise about a state of affairs; since the Insurance Act 2015, breach of a warranty suspends the insurer’s liability while the breach continues rather than discharging the contract outright. The distinction decides both who bears the burden of proof and what remedy follows — see warranty, condition precedent and representation.

How the courts construe exclusions

The modern approach is contextual. In Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2016] UKSC 57, also reported under the name Impact Funding Solutions v Barrington Support Services, the Supreme Court declined to apply a general presumption against exclusions in insurance contracts, on the basis that an exclusion in a policy typically defines the risk the insurer has agreed to take rather than excusing it from a liability it would otherwise bear. That reasoning was applied in Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm), where the court confirmed that exclusions should be read with sensitivity to their purpose and place in the contract, and that a restrictive construction applies only where there is genuine ambiguity.

The practical consequence is that arguing an exclusion is “too wide” is rarely productive. A clear exclusion will be applied. The productive arguments are about whether the facts fall within the words, and about how the exclusion interacts with the definitions and any carve-back.

Carve-backs

Most commercially important exclusions are not absolute. A carve-back, or write-back, restores a defined slice of cover inside an exclusion: an insolvency exclusion that does not apply to claims by third parties, a dishonesty exclusion that preserves cover for innocent partners, a cyber exclusion that writes back ensuing physical damage from named perils. The carve-back is frequently the most negotiated wording on the placement and the least read. When comparing two quotations, comparing exclusion headings tells you almost nothing; comparing carve-backs tells you most of what you need.

Exclusions the Insurance Act touches

Section 11 of the Insurance Act 2015 restricts an insurer’s ability to rely on non-compliance with a term — whether framed as a warranty, a condition or an exclusion — that is designed to reduce the risk of loss of a particular kind, at a particular location or at a particular time, where the insured can show the non-compliance could not have increased the risk of the loss that actually occurred. That does not touch exclusions defining the subject matter of the insurance or the risk as a whole; it targets risk-mitigation terms. See section 11.

The exclusions that matter commercially

In liability and professional indemnity programmes the recurring ones are known circumstances, dishonesty, insolvency, fines and penalties, pollution, contractual liability assumed beyond the general law, and cyber. In property and marine programmes, terrorism, asbestos, radioactive contamination and weapons exclusions such as CL370, and the treatment of electronic data. In every case, the definitions clause is doing at least as much work as the exclusion itself — see definitions clause.

What to do with an exclusion list

Read it against the business, not against the last policy. For each exclusion, ask what realistic scenario it would bite on, whether a carve-back exists, and whether the same exclusion appears in the same form in every layer of the programme. Inconsistency between primary and excess wordings is a common and avoidable source of uninsured loss. Where an exclusion is genuinely unacceptable, the options are negotiation, a separate policy addressing the excluded exposure, or a documented decision to retain the risk — all three are legitimate; leaving it unexamined is not.

Frequently asked questions

Is contra proferentem still applied to insurance exclusions?

Only where there is genuine ambiguity. Following Impact Funding v AIG and Crowden v QBE, exclusions in insurance are generally treated as defining the risk accepted rather than as clauses to be construed restrictively as a matter of course.

What is the difference between an exclusion and a condition?

An exclusion says a loss was never insured. A condition imposes an obligation on the insured, and the effect of breach depends on whether the condition is a condition precedent to liability or merely a bare condition.

What is a carve-back?

Wording inside an exclusion that restores a defined part of cover — for example an insolvency exclusion that does not apply to third-party claims. Carve-backs are usually where the real difference between two competing wordings lies.

Related entries

• Contra proferentem
• Known circumstances exclusion
• Dishonesty exclusion
• Section 11, Insurance Act 2015
• Definitions clause
• Cyber exclusions in non-cyber policies

This entry is part of the Apex Insurance Wiki. Position stated as at August 2026. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and not regulated advice on a specific policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.