Contractual liability refers to liability that arises because of obligations you agree to in a contract.

A contract can require you to accept responsibilities that may be broader than the liability you would otherwise have under general law.

Examples can include:

• Indemnifying another party
• Accepting responsibility for losses caused by other parties
• Waiving rights of recovery
• Providing warranties or guarantees
• Accepting a higher standard of responsibility
• Agreeing to particular insurance obligations

Does insurance automatically cover contractual liability? #

Not necessarily.

Many insurance policies contain contractual liability exclusions or limitations.

A policy may cover liability that you would have had even without the contract, but may not cover additional liability that exists solely because you agreed to accept it under a contract.

The precise position depends on the policy wording and the contractual obligation involved.

Check contracts before signing #

Where possible, insurance requirements and liability clauses should be reviewed before a contract is signed.

We can help identify insurance-related issues such as:

• Required policy types
• Limits of indemnity
• Excess requirements
• Principal or interested-party requirements
• Territorial or jurisdictional requirements
• Insurance-related indemnities

However, interpretation or negotiation of the legal terms of a contract may require advice from your solicitor.

You can also read our detailed guide to Contractual Liability Essentials.

If you would like us to review the insurance requirements in a contract, contact our team.