Legal Definitions - insuring clause

An insuring clause (also known as an insuring agreement) is a crucial section found in an insurance policy or bond. This provision clearly outlines the specific risks or events that the insurance company agrees to cover and precisely defines the extent or boundaries of that coverage. Essentially, it tells the policyholder what situations or losses are protected by the insurance contract.

Here are a few examples to illustrate how an insuring clause works:

• Homeowner's Insurance Policy: Imagine a homeowner's policy with an insuring clause that states, "We will pay for direct physical loss to your dwelling and personal property caused by perils such as fire, lightning, windstorm, hail, explosion, and theft, subject to the exclusions and limitations described elsewhere in this policy."

  Explanation: This clause identifies the specific risks (fire, theft, windstorm) that the insurer is taking on and defines the scope of coverage (direct physical loss to the dwelling and personal property). It clearly communicates what types of events would trigger a claim under this part of the policy.

• Automobile Collision Coverage: In an auto insurance policy, the insuring clause for collision coverage might read, "We will pay for loss to your covered auto caused by its collision with another object or by its overturn."

  Explanation: This clause precisely defines the risk being covered: damage to the insured vehicle specifically resulting from a collision or overturning. It sets the scope, making it clear that other types of damage, like those from hail or vandalism, would not fall under this particular insuring clause.

• Professional Liability (Errors & Omissions) Policy: A consultant's professional liability policy might contain an insuring clause stating, "We will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of any negligent act, error, or omission in the performance of professional services rendered by the Insured."

  Explanation: This clause specifies the exact type of risk the insurer covers: financial damages resulting from the consultant's professional negligence, errors, or omissions. It defines the scope of coverage to professional services, distinguishing it from other potential liabilities the consultant might face.