Persons covered: Overview, definition, and example
What are persons covered?
Persons covered refers to the individuals or groups who are protected or included under a legal agreement, insurance policy, or business contract. This term defines who is entitled to benefits, protections, or obligations under the agreement. Persons covered can include employees, contractors, shareholders, insured individuals, or other specified parties.
For example, in a company’s health insurance plan, the persons covered may include full-time employees and their dependents. In a business liability policy, it could include executives and board members.
Why are persons covered important?
Clearly defining persons covered ensures that all parties understand who is eligible for benefits, protections, or liabilities. Without a clear definition, disputes can arise over who is entitled to coverage or responsible for obligations.
For SMBs, this is especially important in contracts, insurance policies, and employment agreements. Ensuring that employees, partners, or stakeholders are properly covered under the right agreements can prevent misunderstandings and legal issues.
Understanding persons covered through an example
Imagine a small business purchases a general liability insurance policy. The policy states that "persons covered" include the business owner, employees, and authorized agents. If an employee causes accidental property damage while working, the insurance will cover the costs because they are listed as a covered person under the policy.
In another case, a partnership agreement specifies that only active business partners are covered under the company’s profit-sharing plan. If a former partner tries to claim a share of the profits after leaving the business, the agreement prevents them from doing so because they are no longer a covered person.
An example of a persons covered clause
Here’s how a persons covered clause might appear in a contract:
“For the purposes of this Agreement, ‘Persons Covered’ shall include employees, officers, directors, and authorized representatives of the Company. Any individual not explicitly listed as a covered person shall not be entitled to the benefits or protections under this Agreement.”
Conclusion
Defining persons covered in contracts and policies helps businesses avoid disputes, clarify responsibilities, and ensure proper legal protection. For SMBs, making sure employees, partners, and key stakeholders are covered under the right agreements is essential for risk management and operational clarity. Clearly outlining persons covered in contracts and insurance policies ensures fairness and prevents future conflicts.
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.