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📝 '''Contractual liability''' refers to the legal obligation an insured assumes under the terms of a contract or agreement, as distinguished from liability imposed by common law or statute. In insurance, this concept is critical because standard [[Definition:Commercial general liability (CGL) | commercial general liability]] policies historically excluded liability assumed under contract, except for certain carve-outs known as "insured contracts." Understanding what a policy covers — and what it does not — when a business contractually indemnifies another party is central to proper [[Definition:Risk transfer | risk transfer]] and [[Definition:Coverage | coverage]] analysis.

🔍 Most modern CGL policies include an exception to the contractual liability exclusion for specific categories of agreements, such as leases, sidetrack agreements, elevator maintenance contracts, and — most broadly — any contract under which the insured assumes the [[Definition:Tort | tort]] liability of another party. An [[Definition:Underwriter | underwriter]] evaluating a risk must assess the breadth of [[Definition:Hold harmless agreement | hold harmless]] and [[Definition:Indemnity | indemnification]] clauses the insured routinely signs, since these obligations can dramatically expand the insured's exposure profile. [[Definition:Broker | Brokers]] often work with clients to ensure their policies adequately address the contractual commitments embedded in vendor agreements, construction contracts, or service-level agreements.

⚠️ Gaps between what a business promises in its contracts and what its insurance actually covers represent one of the most common — and costly — sources of uninsured loss. A construction firm, for example, might sign a subcontract requiring it to indemnify the general contractor for all claims arising from the project, yet its [[Definition:Insurance policy | policy]] may not respond if the assumed liability falls outside the "insured contract" definition. Proper alignment of contractual obligations with insurance coverage requires coordination among [[Definition:Risk manager | risk managers]], legal counsel, and insurance advisors, and it is an area where [[Definition:Claims adjuster | claims adjusters]] frequently encounter disputes during the [[Definition:Claims process | claims process]].

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Commercial general liability (CGL)]]
* [[Definition:Indemnity]]
* [[Definition:Hold harmless agreement]]
* [[Definition:Additional insured]]
* [[Definition:Risk transfer]]
* [[Definition:Exclusion]]
{{Div col end}}

Definition:Contractual liability - Revision history

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