Contractual Liability Insurance Policy (CLIP)

Let’s break it down:

Contractual Liability: The Core Issue

Contractual liability arises when you assume the liability of another party by entering into a contract. This is important because standard liability insurance policies often exclude coverage for liabilities you assume in a contract.

How Insurance Addresses Contractual Liability

Instead of a specific “CLIP” policy, contractual liability is handled through several types of insurance and endorsements:

• Commercial General Liability (CGL) Insurance: This is a core policy for most businesses. While it generally excludes contractual liability, it can be modified.
  • Contractual Liability Endorsement: This is a crucial addition to a CGL policy. It provides coverage for liabilities you assume in specific types of contracts, such as:
    • Leases: If you agree to be responsible for certain damages to a property you lease.
    • Construction contracts: If you agree to hold a contractor harmless.
    • Service agreements: If you agree to be responsible for certain liabilities arising from the services you provide.
• Errors and Omissions (E&O) Insurance: This is crucial for businesses providing professional services. It can cover claims arising from negligence or errors in your services, which might be defined in a contract.
• Professional Liability Insurance: Similar to E&O, this is for professionals like doctors, lawyers, etc., and covers liability for professional negligence.

Key takeaway:

Contractual liability is not typically covered by a standalone “CLIP” policy. Instead, it’s addressed through endorsements to CGL policies and other liability insurance policies like E&O. It’s essential to carefully review your contracts and work with an insurance professional to ensure you have the appropriate coverage.