“Contractual liability is covered under the Commercial General Liability Policy (CGL) subject to some limitations. The coverage is necessary because many business firms enter into contracts with others where they agree to assume the tort liability of someone else. A common such agreement is a “”hold harmless agreement”” between a tenant and a landlord. Here the tenant agrees to hold the landlord harmless for any acts of the tenant, the tenant’s visitor, employees, or independent contractors.For example, a tenant hires a plumber to install new bathroom fixtures in his office restroom. Several days later, a pipe ruptures and floods the office below. The tenant in the lower office sues the landlord for negligence in maintenance of the building’s plumbing. Further investigation leads to the fact that it was the negligence of the plumber in installing the new fixtures. The hold harmless agreement states that the tenant will reimburse the landlord for any acts of the tenant’s independent contractors. While the plumber may ultimately be the one who pays the damages, the landlord is not concerned with this problem. The tenant pays the damages to the office below him and the landlord is not involved. Thus, the landlord has transferred the risk of having tenants in his building to each of his tenants by .means of a hold harmless
The Commercial General Liability excludes the assumption of liability in a contract with two exceptions:
Liability is provided by the insured if the liability would be imposed without any contract or agreement, and,
Liability that is assumed under an “”insured contract.””
Insured contracts include, but are not limited to:
Lease of premises (but not for a promise to pay fire damage to a premises you rent or occupy)
Sidetrack agreement Easement or license agreement (not for construction or demolition on or within 50 feet of a railroad) Indemnify a municipality (except for work for the municipality)
H Elevator maintenance agreement
Broad form contractual coverage may be added to the Commercial General Liability policy that covers the insured for any tort liability the insured assumes for someone else.”
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Legal liability assumed under contract. See Also: “Liability, contractual liability.”
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UK: Liability that arises as a result of a contract, as opposed to liability, imposed by common law or statute. Liability policies exclude liability for liquidated damages as, unlike unliquidated damages, they are agreed under contract.
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Liability that does not arise by way of negligence but by assumption under contract. For example, in certain leases, a tenant may assume a landlord’s liability to others for unsafe conditions on the premises. Some such assumptions are covered automatically under the Commercial General Liability form.