Consequential and pure financial loss
A central distinction in French liability policies between financial harm that follows covered bodily injury or property damage and financial harm that occurs without any such damage.
French liability policies sort damage into three families: bodily, property and intangible. Intangible damage is financial harm, lost revenue, loss of use, service interruption. It is called consequential when it follows covered bodily injury or property damage: the delivered machine catches fire, destroys the customer's workshop, and the customer loses three months of production. It is called non-consequential, or pure financial loss, when it occurs alone: the delivered software contains an error, nothing is destroyed, but the customer loses the same revenue. The distinction drives the cover. Consequential loss follows the fate of the damage it stems from and usually shares its limit. Pure financial loss is often excluded or covered under a narrow sublimit, because it is harder to bound and comes close to a guarantee of proper contract performance. English terminology maps poorly onto French: consequential loss has several meanings depending on whether one speaks of property insurance or contract clauses, and pure financial loss corresponds to the non-consequential category. For digital and consulting businesses, whose claims are almost all pure financial loss, this dividing line decides whether the policy is of any use.
Textbook case: an integrator delivers faulty payroll software; a customer's salaries are paid ten days late and the customer claims 300,000 euros in social penalties. No property damage: this is pure financial loss, which the integrator's general liability policy caps at 150,000 euros, whereas a professional liability policy would have covered it as its main cover.
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