insurance

Insured Contract

A contract or agreement that is covered under a liability insurance policy, meaning the insurance company will defend and pay claims arising from that contractual obligation. This coverage protects against liability assumed through written contracts.

Example

“The construction company's general liability policy covered the hold harmless agreement as an insured contract, protecting them when the property owner sued over an injury.”

Memory Tip

Think 'Contract under Insurance umbrella' - the contract gets protection under your liability insurance policy.

Why It Matters

Insured contract coverage protects businesses from liability they assume through contracts, preventing them from being responsible for claims without insurance backing. Without this coverage, businesses could face unlimited liability from contractual obligations.

Common Misconception

Many business owners believe all their contracts are automatically covered by their general liability insurance, but coverage typically only applies to specific types of contracts defined in the policy. Not all contractual agreements qualify as insured contracts.

In Practice

ABC Contracting signs a lease requiring them to hold the landlord harmless for any injuries in their rented space. When a customer slips and sues both ABC and the landlord for $100,000, ABC's general liability policy covers the claim as an insured contract. The insurance company pays the $100,000 settlement and $25,000 in legal fees, protecting ABC from the liability they assumed in the lease agreement.

Etymology

Combines 'insured' from Latin 'securus' (secure) and 'contract' from Latin 'contractus' (drawn together), referring to agreements that are secured by insurance coverage.

Common Misspellings

insurred contractinsurered contractinsured contracensured contract

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