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Aggregate Limit (Per Location)

What is an Aggregate Limit (Per Location)?

Aggregate Limit (Per Location) is an insurance endorsement that applies a separate "cap" or maximum payout amount to each individual business premises covered under a single policy. The definition of this term ensures that a major claim at one storefront does not exhaust the total insurance funds available for the other locations. In a franchise context, the meaning of this provision may refer to a safeguard that protects a multi-unit franchisee—and the franchisor—from being "tapped out" by a single catastrophic event.

Aggregate Limit (Per Location) in More Detail

The Aggregate Limit (Per Location) endorsement is one of the most vital technical requirements a franchisor can include in their Item 8 disclosures. Most standard liability policies have a general “aggregate limit,” which is the total amount the insurer will pay for all claims during a policy year. Without a per-location trigger, the meaning of a $2M aggregate is that if Location A has a $2M fire, Locations B and C have $0 in coverage remaining for the rest of the year. The definition of the “Per Location” endorsement is to treat each address as having its own independent “bucket” of money.

When a franchisor audits a franchisee’s coverage, the absence of this term may refer to a significant “limit dilution” risk. If a savvy plaintiff’s attorney discovers that a multi-unit operator has already exhausted their policy limits at another store, they will immediately look to the franchisor’s corporate “Deep Pockets” to bridge the gap. By mandating a Per Location Aggregate, the franchisor ensures that every “unit” in their system is backed by a fresh set of limits, regardless of what happens elsewhere in the franchisee’s portfolio.

For franchisors, this isn’t just a technicality—it’s a scaling strategy. As franchisees grow from single-unit to multi-unit developers, their risk profile shifts. Requiring the Aggregate Limit (Per Location) ensures that the insurance infrastructure grows alongside the footprint, keeping the “liability firewall” strong for every single door that opens under the brand’s name.

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