Contracts Create Insurable Consequences |
An insurance policy is a contract that creates its own operating environment. Various insuring agreements, conditions, exclusions, and definitions come together to build a little world of protection. It becomes a place where protection is triggered by a set of circumstances. Coverage extends, normally, to a small set of persons who suffer certain losses.
Click here for a full account of a court dispute where uncertainty arose. Specifically, it involves what parties were covered and how a business agreement resulted in expanded insured status.
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Who Is Protected? |
Who is covered under an insurance policy is largely determined by the definition of who qualifies as an insured. Without a precise explanation, post-loss situations could be chaotic. That is one reason why policies are designed to control the coverage obligation.
Click here to see a what is meant by a covered person under a policy's definitions section. The excerpt is from AAIS Commercial Liability Coverage Form Analysis under PF&M found in Advantage Plus.
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Circumstances Can Expand Coverage Responsibility |
Coverage obligations don't merely rest under a policy's definitions of an insured. That status may also be granted, sometimes even unintentionally, via an insured's operations. While not a daily or even a frequent occurrence, businesses commonly make agreements with other parties. Some of these agreements can expand the risks of loss.
Expansion is often due to one business accepting legal responsibility for harm that, otherwise, would belong to another party. Insurance companies are aware of this and, typically, policy language is designed to avoid or at least minimize increased exposures. A term, insured contract, is used to address assumptions of additional liability for harm or loss caused to others.
Click here to see a discussion of an insured contract from Gordis on Insurance found in Advantage Plus.
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Why Policies Are Wary Of Expanded Responsibility |
There are various reasons that insurance policies include different limits and constraints. One reason is that insurers are, in most instances, in the business of making a profit and that requires a great deal of work. Also, policies have to be affordable to those that purchase coverage. Pricing, policy language, exclusions, underwriting, and coverage limits all work to maintain a viable product.
Click here to see a discussion of contractual liability from Emarketing for Agencies found in Advantage Plus.
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