Consequential Loss Coverage Clause Samples

The Consequential Loss Coverage clause defines the extent to which losses that are not a direct result of an incident, but arise as a consequence of it, are covered under an agreement or insurance policy. This clause typically clarifies whether damages such as lost profits, business interruption, or reputational harm are included or excluded from coverage. For example, if a manufacturing plant suffers a fire, consequential losses might include the revenue lost during downtime, not just the cost to repair the facility. The core function of this clause is to allocate risk and provide clarity regarding the parties' responsibilities for indirect or secondary losses, thereby preventing disputes over the scope of recoverable damages.