What type of clause in a professional indemnity policy allows an insurer to avoid paying for losses if the insured admits responsibility?

The clause that allows an insurer to avoid paying for losses if the insured admits responsibility is known as a condition precedent to liability. This type of clause establishes certain conditions that must be met for the insurer to be obligated to pay a claim. If the insured admits liability or accepts responsibility for a loss without the insurer's consent, the insurer can invoke this condition to deny the claim, as the insured has failed to conform to the terms established in the policy that are necessary for coverage.

Conditions precedent are critical in professional indemnity policies since they ensure that the insurer’s liability is carefully managed, preventing situations where the insured might compromise their position or the insurer's ability to defend a claim. Imposing such a condition encourages the insured to handle claims with consideration to the insurer's interests and to seek guidance before making admissions that could affect liability.

In contrast, an exclusion clause specifically outlines what is not covered under the policy but does not relate to the insured's admissions of liability. A limitation of liability restricts the maximum amount the insurer is obligated to pay in the event of a claim, while a warranty clause includes specific promises or guarantees that must be upheld by the insured for the policy to remain valid. Thus, these options do not encompass the scenario where an admission of