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📋 '''Innocent insured provision''' is a clause written into an [[Definition:Insurance policy | insurance policy]] that explicitly preserves coverage for any [[Definition:Insured | insured]] who did not participate in, direct, or have knowledge of the act — typically [[Definition:Fraud | fraud]], [[Definition:Misrepresentation | misrepresentation]], or an intentional wrongful act — that would otherwise void or restrict the policy. While the [[Definition:Innocent insured doctrine | innocent insured doctrine]] is a court-created remedy, the innocent insured provision is its contractual counterpart: a deliberate policy drafting choice that removes ambiguity by spelling out how innocence is treated when multiple insureds share a policy.

🔧 These provisions appear across several lines. In [[Definition:Directors and officers liability insurance (D&O) | directors and officers (D&O)]] policies, for example, a typical innocent insured provision — sometimes called a "severability" or "non-imputation" clause — ensures that one director's fraudulent conduct does not eliminate coverage for the remaining directors who acted in good faith. Similarly, in [[Definition:Homeowners insurance | homeowners]] and [[Definition:Commercial property insurance | commercial property]] forms, the provision protects a co-insured from losing coverage because another named insured committed [[Definition:Arson | arson]] or made material misstatements on the [[Definition:Application | application]]. The scope and strength of the provision depend on its precise wording: some carve out only [[Definition:Defense costs | defense cost]] coverage for the innocent insured, while others preserve full [[Definition:Indemnity | indemnification]] rights up to the [[Definition:Coverage limit | policy limits]].

✅ Including a robust innocent insured provision has become a significant negotiation point in [[Definition:Policy placement | policy placement]], particularly in management liability and [[Definition:Professional liability insurance | professional liability]] lines where the actions of one insured can expose an entire organization. [[Definition:Broker | Brokers]] advising [[Definition:Policyholder | policyholders]] scrutinize these clauses carefully, because a weak or missing provision can leave innocent executives personally exposed in the aftermath of a colleague's misconduct — exactly the scenario the policy was purchased to prevent. From an [[Definition:Underwriting | underwriting]] standpoint, carriers must balance the commercial expectation of protecting innocent parties against the [[Definition:Moral hazard | moral hazard]] concern that overly broad provisions could reduce the deterrent effect of policy conditions, making thoughtful drafting essential.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Innocent insured doctrine]]
* [[Definition:Severability of interests clause]]
* [[Definition:Directors and officers liability insurance (D&O)]]
* [[Definition:Non-imputation clause]]
* [[Definition:Misrepresentation]]
* [[Definition:Moral hazard]]
{{Div col end}}

Definition:Innocent insured provision - Revision history

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