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Direct and Indirect Liability

Definition

The concept of liability can be divided into direct liabilities and indirect liabilities.

The line between the two is not very clear.

A good way to demonstrate the concept is to provide examples.

If Pat negligently hits Henry is his car, Henry's injuries would be a direct loss. Henry's loss of income and business opportunity would be indirect loss.

When you're talking about dollars and cents, in most cases, the numbers around indirect loss are much larger than direct loss. That's why you'll often see limitations of liability for indirect loss.

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