CommerceGuard.org is the primary site of the Commerce Accountability Project (CA Project, LLC), an organization dedicated to exposing anti-competitive, anti-labor and anti-consumer practices in industry. We rely on the support of the public to continue our work. If you would like to support us, please consider donating or volunteering. You can learn more about us here.
Glossary
InsuranceFinanceHealthcareEmployment LawPrivacy
Glossary > Insurance > Business Insurance > General Liability Insurance
Legal Disclaimers

Contractual Liability

Contractual liability in insurance refers to the legal obligation one party assumes as a result of entering into a contract or agreement, where they agree to indemnify, defend, or hold harmless another party for certain claims. This type of liability is typically not covered under a general liability insurance policy unless specifically endorsed or included. It involves liabilities that one party assumes on behalf of another through a written or oral agreement.

Example #1

Example 1: A small business owner signs a contract with a building owner to lease office space. In this agreement, the small business owner agrees to indemnify the building owner for any damages caused to the property by the business operations.

Example #2

Example 2: An event planner enters into a contract with a venue for a wedding reception. As part of the contract, the event planner agrees to hold harmless the venue for any injuries sustained by guests during the event.

Misuse

Misuse of contractual liability can occur when parties do not fully understand the scope of the liabilities they are assuming in the contract. This can lead to financial risks and legal disputes if one party fails to fulfill their obligations. It is essential to carefully review and negotiate contractual terms to protect against unexpected liabilities.

Benefits

The benefit of contractual liability coverage is that it provides financial protection against potential legal claims arising from contractual agreements. By having this coverage, businesses can transfer some of the risks associated with contractual obligations to their insurance provider, which helps protect their assets and financial stability.

Conclusion

Understanding and managing contractual liability is crucial for businesses to protect themselves from unforeseen legal and financial risks. By carefully reviewing contracts, obtaining appropriate insurance coverage, and seeking legal advice when necessary, businesses can safeguard their interests and ensure fair treatment in their business relationships.

Related Terms

General Liability InsuranceIndemnityLiabilityCoverage

Last Modified: 4/29/2024
Was this helpful?