Operating-JV Cover Is a Different Problem from Deal Cover
Most cross-border insurance writing for Indian companies stops at the transaction: warranty and indemnity cover, tax liability insurance, and the mechanics of a share purchase. A joint venture is not a transaction that ends at closing. It is a living operating company that manufactures, ships, employs, contracts, and can be sued for the next ten or fifteen years. The insurance question shifts from "who bears the warranty risk on the deal" to "who buys, pays for, and controls each operational policy for the JV, and what happens when the JV or one partner suffers a loss."
The classic pattern is an Indian company forming a 50:50 or 51:49 venture with a US, European, Japanese, or Korean partner: a manufacturing plant, an auto-component line, a chemicals facility, a technology-transfer arrangement, or a services delivery centre. Each partner walks in with different assumptions. The foreign partner usually expects the JV to slot into its worldwide insurance programme with the limits, wordings, and reporting its head office mandates. The Indian partner assumes local policies from an Indian insurer will cover the plant, the workforce, and third-party exposure, as they always have for its wholly owned sites.
Both assumptions are partly right and dangerously incomplete. The JV is an Indian company owning Indian property and employing Indian workers, so a large part of its risk must be insured in the Indian admitted market by law. At the same time the foreign partner's contractual and governance requirements pull toward its global programme. The insurance schedule of the JV agreement is where these two forces are reconciled, and it is the single document most often drafted by lawyers who copy a limits table from a precedent without asking whether the two partners' expectations even align.
Who Procures Which Policy: The JV Entity Versus the Partners
The first allocation decision is procurement responsibility. Three layers usually need separate answers.
The JV entity's own operational cover is normally procured by the JV, in its own name, from an Indian insurer. This includes the plant and stock property insurance on a Standard Fire and Special Perils basis, machinery breakdown and boiler cover on the equipment, workers-compensation under the Employees' Compensation Act for the workforce, motor cover on JV-owned vehicles, marine and transit cover on inbound raw material and outbound finished goods, and public-liability for third-party injury and property damage at the site. These are Indian risks on Indian property and, under Section 2CB of the Insurance Act, 1938, they must be placed with an Indian-registered insurer unless IRDAI has specifically permitted otherwise. The JV buys them, the JV pays the premium, and the premium is a JV operating cost that flows through the profit-and-loss both partners share.
Each partner's own corporate cover stays with that partner. The Indian partner's group directors-officers-liability tower, the foreign partner's global master policy, and each parent's own balance-sheet protection do not automatically extend to the JV. The JV is a separate legal person, so the partners must decide deliberately whether the JV is added as a named insured or an additional insured on any parent programme, or whether it stands entirely on its own policies.
A JV does not inherit its parents' policies by default. An Indian JV company that a foreign partner assumes is "covered under our global programme" may in fact hold no local policy at all, because the global master is non-admitted in India and cannot lawfully insure the local risk. Confirm at incorporation, not after a fire.
The cleanest structures name the JV as the policyholder for its ground-up operational lines placed locally, and use the foreign partner's global programme only as a difference-in-conditions and difference-in-limits layer sitting above the admitted local tower, where that is permitted. That way the JV meets Indian admitted-market rules and the foreign partner still gets the limit and wording consistency its board demands.
Additional Insured, Cross-Liability, and Waiver of Subrogation Between Partners
Once procurement is settled, the partners have to decide how each policy treats the other partner. Three endorsements do most of the work, and each carries a trap.
Additional-insured status is the request that Partner A be named on a policy the JV or Partner B procures, so that A has direct rights under it. On the JV's liability cover, both partners commonly ask to be named additional insureds so that a third-party claim which reaches back to a parent is defended under the JV policy. The trap is that adding a partner as an insured, without more, can defeat a subrogation recovery, because an insurer cannot subrogate against its own insured.
Cross-liability is the answer to the awkward fact that on a single shared policy, one insured may want to claim against another. A cross-liability or separation-of-insureds clause treats each insured as if it held its own separate policy, so that if the Indian partner's staff injure the foreign partner's seconded engineer at the JV plant, the injured party can still claim. Without this clause, a shared liability policy can exclude claims by one insured against another and leave a real intra-JV injury uninsured.
Waiver of subrogation is where the partners agree that the JV's insurer will not pursue recovery against either partner after paying a JV loss. This is standard and sensible: partners in a venture do not want their own insurer suing each other and poisoning the relationship. It must be an endorsement on the policy, requested at inception, not merely a promise in the JV agreement. An insurer that has not agreed the waiver retains its subrogation right regardless of what the partners wrote between themselves.
Aligning the Foreign Partner's Global Programme with Indian Admitted-Market Rules
The foreign partner almost always brings a controlled master programme: a global policy issued in its home country with local admitted policies fronted in each territory where the group operates. When it enters an Indian JV, it wants the JV to be a covered location under that architecture. Indian law constrains how far that can go.
Under Section 2CB of the Insurance Act, 1938 and IRDAI's placement rules, the physical Indian assets and Indian employer liabilities of the JV have to be insured on a locally admitted policy issued by an Indian insurer. A non-admitted foreign master policy cannot be the primary insurer of the Indian plant. The workable structure is a local admitted policy in India that provides the ground-up cover, sitting underneath the foreign partner's global master, which then operates as a top-up. The master supplies difference-in-limits capacity where the local limit is lower than the group standard, and difference-in-conditions where the local wording is narrower than the master wording.
Three practical points decide whether this works. First, premium allocation: the group charges the JV an allocated premium for its share of the master, and both partners have to accept that allocation as fair, because the Indian partner is effectively part-funding a programme designed around the foreign group's global risk. Second, claims control: the foreign partner's group insurance team will expect to manage large claims through its broker, which the Indian partner and the JV's local management may find opaque. Third, non-admitted tax and compliance exposure: where a global master pays a claim into India that should have run through the admitted local policy, there can be tax, exchange-control, and regulatory questions about money moving into India outside the admitted channel.
The JV agreement should state explicitly whether the JV participates in the foreign partner's global programme, who bears the allocated premium, and that in every case the Indian admitted policy is the primary layer for local risk. Leaving this to be worked out after incorporation invites the foreign partner's insurance team and the Indian management to discover a gap only when a loss lands.
D&O for Nominee Directors on the JV Board
A JV board is composed of nominee directors: individuals appointed by each partner to represent its interest on the JV's board. Nominee directors carry a personal exposure that neither partner's standard corporate cover reliably answers.
Under the Companies Act, 2013, a director of an Indian company owes duties to that company, not to the shareholder who nominated them. A nominee director who votes the way their appointing partner wants, against the JV's own interest, can face a claim for breach of duty, oppression and mismanagement proceedings under Sections 241 and 242, or regulatory action, and the appointing partner cannot simply indemnify their way out of a statutory liability. The JV therefore needs its own directors-officers-liability policy covering the JV's board, and both partners need to check that their nominees are covered by it.
The cover has to answer three JV-specific questions. Does the JV D&O respond to a claim brought by one shareholder against a director nominated by the other, or does an insured-versus-insured exclusion block it? A JV is precisely the setting where one partner sues the other's nominees, so the exclusion needs to be carved back for shareholder-derivative and JV-dispute claims. Does the nominee director also enjoy cover under their appointing parent's group D&O when acting on the JV board, and if so, which policy responds first? A double-insured director is common in JVs and the order of response and contribution between the two towers should be settled in advance. And does the JV D&O cover the individual for acts done before the JV was capitalised, during the formation phase when directors were already taking decisions?
When a Loss Hits and Each Partner Assumed the Other Had Insured It
The recurring dispute in cross-border JVs is not about premium. It is about the gap that appears after a loss, when each partner is convinced the other was responsible for buying the cover that turned out to be missing.
The pattern repeats across sectors. A fire at the JV plant reveals that the property cover was placed at replacement cost for the building but on an outdated sum-insured for the imported machinery the foreign partner contributed, so the average clause cuts the machinery claim. A product-recall event traces to a component the JV assembled, and neither the JV's product-liability cover nor the foreign partner's global recall programme clearly picks it up, because each assumed the other's policy was the primary layer. A workplace injury to a seconded expatriate engineer sits between Indian workers-compensation, which the JV bought for local staff, and the home-country cover the foreign partner assumed still applied to its secondee.
Each of these is a governance failure disguised as an insurance failure. The fix is not a bigger policy but a written allocation, agreed at formation, of which party procures each line, at what limit, on what valuation basis, and with which partner named. When the insurance schedule of the JV agreement is a real allocation matrix rather than a copied limits table, the after-loss dispute mostly disappears, because the answer to "whose policy was this" is already on paper and reconciled with the actual policies in force.
The review discipline matters as much as the drafting. JV operations drift: the machinery is upgraded, a new product line is added, the workforce grows, a second site opens. An insurance schedule agreed at incorporation and never revisited slowly stops matching the business it was meant to protect.
The Insurance Schedule: A Clause Checklist for the JV Agreement
The insurance schedule attached to a cross-border JV agreement should function as an allocation matrix, not a wish list of limits. At minimum it should fix the following, line by line.
- Procurement responsibility per policy. State for each line (property, machinery breakdown, marine and transit, motor, employer liability and workers-compensation, public liability, product liability, D&O, cyber) whether the JV, the Indian partner, or the foreign partner procures it, and in whose name.
- Admitted-market compliance. Record that all Indian property, employer, and motor risks are placed with an IRDAI-registered insurer on an admitted basis, and that any foreign master programme sits only as a difference-in-conditions and difference-in-limits layer above the local tower.
- Minimum limits and valuation basis. Set the minimum sum insured and the valuation basis (reinstatement value versus market value) for each material line, with a mechanism to escalate limits as the JV grows, especially on imported machinery contributed by the foreign partner.
- Named and additional insureds. Specify which partner is named or added as an additional insured on which policy, and pair every additional-insured grant with the cross-liability and subrogation-waiver treatment agreed with the insurer.
- Nominee-director cover. Require the JV to maintain its own D&O tower, confirm the insured-versus-insured exclusion is carved back for JV-partner disputes, and set the run-off period on exit.
- Claims control and cooperation. Define who leads large claims, how the two partners share loss information, and the notification obligations, so a claim is reported inside every policy's notice period rather than lost to a missed deadline.
- Certificates and evidence. Require each procuring party to deliver a current certificate of insurance annually, so each partner can verify that the cover it is relying on is actually in force.
- Review and exit. Set an annual insurance review tied to the business plan, and address what happens to the policies, the run-off, and the shared claims history when a partner exits or the JV winds up.
Comparing the actual insurer wordings against this matrix is where the exercise is won or lost. Sarvada's searchable database of insurer policy wordings lets a broker or a JV's risk manager line up the exclusions, cross-liability language, and admitted-market treatment across carriers, so the schedule in the JV agreement is checked against what the policies really say rather than what the limits table promises.