Which type of indorsement limits the liability of the indorser?

A qualified indorsement is indeed the type that limits the liability of the indorser. When an indorser places a qualified indorsement on a negotiable instrument, it typically includes phrases such as "without recourse." This language signifies that the indorser is not responsible for the payment of the instrument if the maker or drawer defaults. This contrasts with other types of indorsements, where the indorser might be fully liable for the payment.

In comparison, a blank indorsement simply involves signing one's name on the back of a negotiable instrument, transferring ownership without restricting liability. A special indorsement names a specific payee, thus transferring the instrument to that person but still holding the indorser liable if the payment is not made. Restrictive indorsements impose certain conditions on the use of the instrument, but do not limit the indorser's liability in the same way that a qualified indorsement does. Hence, qualified indorsements are crucial for indorsers who want to transfer their interest in a negotiable instrument while protecting themselves from possible financial risk related to that instrument’s payment.