Co-authored by John Ellison, Benjamin Fliegel, Chris Mosley, Carolyn Rosenberg and Elizabeth Bowman.

Luxury fashion houses operate with uniquely high stakes: reputational sensitivity, high‑value inventory, intricate global supply chains, and data‑rich relationships with customers. Insurance is not a passive safeguard but important protection. Thoughtfully structured coverage spanning directors and officers (D&O), commercial general liability (CGL), cyber-security, and stock-throughput (STP), in conjunction with comprehensive indemnity contracts with additional parties, translates complex risk into predictable outcomes. 

Executive and corporate liability: D&O and CGL in the era of environmental and marketing claims 

Luxury fashion houses may often tout “eco‑friendly” and “responsibly sourced” products. In recent years, these marketing assertions have driven litigation and regulatory scrutiny. D&O and CGL insurance may be helpful in responding to these types of claims. For leadership, D&O insurance may respond to alleged wrongful acts such as alleged misstatements in ESG reports, oversight failures in supply chains (e.g., chemical content or labor practices), breaches of fiduciary duty, and derivative or securities claims. CGL policies supplement this protection and address personal and advertising injury arising from false advertising and bodily/personal injury claims. CGL coverage, however, is often narrowed by exclusions for knowing violations, intentional acts, and certain statutory claims. D&O and CGL policies can be enhanced by tightening definitions, updating endorsements, and coordinating limits.

Cyber risk: Protecting data, operations, and brand equity

Luxury fashion houses are prime targets for cyber threats because they hold high-net-worth customer data, run e‑commerce platforms, and rely on interconnected vendors and manufacturers. First, a robust cyber insurance program should cover first‑party losses. These losses generally include the costs of responding to and investigating cyber events, such as forensics, restoration, ransom, and PR. The cyber insurance program should also cover third‑party liabilities, like consumers’ privacy claims. A fashion house should also prioritize business interruption and contingent business interruption for cloud or supplier outages. The cyber coverage may also close coverage gaps in STP policies, which often exclude cyber‑caused losses like spoofed carrier pickups or payment diversion. Given the brand premium in luxury, pair coverage with reputation management and incident‑response vendors. Above all, align policy wording to your actual digital and supply‑chain architecture so protection matches attacks.

End‑to‑end supply chain coverage: From factory floor to global freight

Luxury supply chains span production, transit, warehousing, pop‑ups, and retail, all of which demand integrated protection. Marine cargo/transit policies should address theft, damage, delay, and counterfeit risks. STP policies combine coverage along the entire supply chain, including transit, storage, and processing. A business should structure business interruption and supply‑chain extensions around delays, forced inventory hold‑over, and missed launch windows. First‑party property policies covering replacement costs can also capture tariff‑driven spikes in materials and construction costs at the time and place of loss. Be mindful of the potential replacement costs to ensure limits are calibrated to these potential increases. To plan coverage, run scenarios that treat a missed shipment as a missed season that immediately impacts revenue and brand reputation, and establish claims pathways and documentation accordingly.

Contracting for protection: Additional insureds and vendor risk management 

Contracts containing strong indemnification protections can be the first line of defense when working with additional parties to produce and deliver your goods. Require your brand to be named as an additional insured on vendors’, manufacturers’, logistics partners’, and event hosts’ policies, with primary and non‑contributory status and waivers of subrogation. While the additional party will provide a certificate of insurance pursuant to the agreement, luxury fashion houses should also obtain and review the actual endorsement wording to confirm coverage applies to your real operations: overseas manufacturing, storage, transit, pop‑ups, and flagship stores. Ensure all relevant entities and subsidiaries are named, verify limits and sub‑limits, and scrutinize exclusions. The indemnity provisions should also mandate notices of cancellation or material changes. Keep in mind though that contractual risk transfer complements, not replaces, your D&O, CGL, cyber, and cargo insurances.

Coverage and claims: Aligning coverage with seasonality and global operations and responding to claims

Dress for success: Design the insurance tower around luxury’s seasonal inventory peaks, high‑value global shipments, and varied geographic exposures, aligning limits, sub‑limits, deductibles, and valuation methods (agreed value, selling price). Scrutinize triggers and exclusions across the different coverages. 

When a claim arises, provide prompt notice to the insurers. Collect documents and evidence of the loss and keep the insurers apprised of any developments. The insurer may issue a reservation of rights or an outright denial – it’s important to carefully analyze correspondence and challenge any wrong reservations or denials. Reed Smith can provide support in proactively reviewing policies, presenting claims, analyzing coverage positions, and pursuing recovery.