Territorial Scope Clause
The territorial scope clause defines the countries or regions in which an international programme or an individual policy provides cover, independently of where a lawsuit may be brought.
- Clause type
- Definition
- Origin/Market
- International programme
- Favours
- Neutral
- Negotiability
- Negotiable
Purpose
The territorial scope clause answers the question of where an insured event must occur for a policy to respond at all. In international programmes this is central, because groups spread locations, supply chains and travel activity across many countries, and cover would otherwise remain unclear. Common wordings range from individually named countries through regions up to “worldwide”.
Effect and limits
Territorial scope must be strictly distinguished from the question of which courts may hear a dispute (jurisdiction clause) and which law applies (choice of law clause); a worldwide cover commitment says nothing about whether a lawsuit is admissible in, for instance, the United States. In addition, many policies exclude specific sanctioned or particularly high-risk countries from scope even where the clause otherwise reads “worldwide”.
Negotiation and practice
At inception it must be checked whether the territorial scope actually covers all relevant locations, subsidiaries and travel routes, and whether cover for newly acquired entities extends automatically or only upon notification. Any tension between a worldwide cover commitment and a narrower jurisdiction clause should be addressed explicitly within the programme to avoid misunderstandings at the time of a claim.