Contractual Liability and the Insured Contract

Abstract

Contractual liability in a CGL policy is an exclusion that bars coverage for breach of contract and breach of warranty claims. The purpose of this exclusion is to eliminate coverage for claims arising under all contracts, except claims arising under an incidental or insured contract. In order to fully understand contractual liability and its application re-read my articles, Additional Insured Endorsement, Construction Defect Claims as Occurrences and Part II posted herein on May 13, 2011, May 13, 2011 and August 23, 2011, respectively.

The contractual liability exclusion bars coverage for breach of contact claims, except for "insured contracts" for bodily injury or property damage, arising after the execution of the agreement.

The contractual liability exclusion does cover the named insured's hold hamless or indemnification agreements in a construction contract. It does not cover the named for its own liability arising out of faulty workmanship, breach of contract or breach of warranty claims.

In sum, contractual liability in a CGL policy is an exclusion, unless the liability assumed in a underlying contract or agreement is an "insured contract."

Keywords: Insured Contract, Hold Harmless Agreement, Assumption of Tort Liability, C/ontractual Liability, Indemnity, CGL policy