Business covered: Overview, definition, and example
What is business covered?
"Business covered" refers to the scope of business activities or operations that are protected, addressed, or included under a particular contract, policy, or agreement. This term often defines the specific type of business or commercial activity that a legal agreement or insurance policy applies to. The "business covered" section helps clarify what is included in the contract's terms and ensures both parties understand the extent of their obligations and rights.
For example, a business insurance policy might specify that it covers the retail activities of a clothing store but not its online operations. In this case, the business covered would specifically refer to the retail store operations.
Why is business covered important?
Defining "business covered" is important because it helps clarify which activities, risks, or assets are included within the scope of a contract, policy, or legal framework. For example, when entering into an insurance contract, it’s crucial to specify which parts of the business are covered in order to avoid confusion or disputes if a claim arises. Similarly, in a service agreement, defining what business operations are covered ensures that the services provided are clearly understood and agreed upon.
In the context of contracts or insurance, identifying the business covered ensures that all parties involved are aware of their responsibilities, rights, and the potential risks that are managed under the agreement.
Understanding business covered through an example
Let’s say a company enters into an insurance policy that covers all risks related to its brick-and-mortar retail store but excludes its e-commerce website operations. This means that if an incident happens at the physical store, such as a fire or theft, the insurance policy will cover the losses. However, if a cyberattack occurs that impacts the online sales, this would not be covered under the policy, as the business covered was limited to the retail store.
Another example could involve a service contract where a marketing agency is hired to handle advertising for a business. The contract could specify that the agency is responsible for managing the client’s social media and online ad campaigns, but the "business covered" does not extend to traditional media like print ads or TV commercials. This definition ensures that both parties understand the boundaries of the service provided.
An example of a business covered clause
Here’s how a clause defining "business covered" might appear in a contract:
“The services provided under this Agreement are limited to the marketing and promotional activities for the retail division of the business. This Agreement does not cover any activities related to the online or e-commerce division, which shall be subject to separate terms and conditions.”
Conclusion
Defining "business covered" ensures clarity by specifying the scope of business activities or operations protected under a contract, policy, or agreement. This is essential in various scenarios, from insurance policies to service agreements, as it helps avoid misunderstandings or disputes about what is included or excluded. By outlining exactly what business activities are covered, businesses can protect their operations more effectively and ensure both parties are aligned on the terms of the agreement.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.