Area where coach carries sovereign (7)
I believe the answer is:
terrain
'area' is the definition.
(terrain is a kind of area)
'coach carries sovereign' is the wordplay.
'coach' becomes 'train' ('train' can be a synonym of 'coach').
'carries' is an insertion indicator.
'sovereign' becomes 'er' (Abbreviation for Elizabeth Regina).
'train' enclosing 'er' is 'TERRAIN'.
'where' acts as a link.
(Other definitions for terrain that I've seen before include "Land of a particular type" , "Trainer (anag) - land" , "Stretch of land, emphasising natural features" , "Tract of land with prevailing characteristic" , "Landscape" .)