Blanket Contractual Liability Insurance

Blanket Contractual Liability Insurance

Investopedia / Xiaojie Liu

What Is Blanket Contractual Liability Insurance?

Blanket contractual liability insurance is liability insurance that provides coverage for all contracts in which the insured is assuming liability. Blanket contractual liability insurance is most commonly used when a business is working with a third party, especially if that third party is using the business’s property.

Key Takeaways

  • Blanket contractual liability insurance provides coverage for all contracts in which the insured individual is assuming liability.
  • Blanket contractual liability insurance is often used in third-party business situations.
  • Having a blanket contractual liability insurance policy doesn't mean a company might not take out a separate liability policy. The two are not mutually exclusive, especially if a company needs protection against short-term risk.

How Blanket Contractual Liability Insurance Works

Blanket contractual liability insurance is designed to be automatically applicable to any agreement that a business may sign. Businesses are more than willing to accept payment from other companies, but are much less inclined to accept risks that come with the arrangement. To protect itself, a business may require other companies to maintain various types of liability insurance policies.

These policies protect both the insured party and the parties with whom the insured works. The coverage is designed to indemnify or “hold harmless” another person or entity for actions not expressly excluded on the insurance policy.

Blanket contractual liability may be included on a policy or added with an additional endorsement.

In most cases, a business will need to prove that it has insurance by a specific deadline. If the deadline passes before proof is provided, the business will not be allowed to begin work. The business may be required to add other parties to the policy to protect them against risk.

Example of Blanket Contractual Liability

For example, a large, multi-day software industry conference allows companies to showcase their offerings in the exhibition hall. The exhibitors bring their own material and set up their own booths. To be allowed to exhibit, the participating company may be asked to provide a certificate indicating that it has commercial liability insurance, contractor’s personal injury insurance, and blanket contractual liability insurance.

The conference may require policy limits over a specific limit, both for per-occurrence and aggregate liabilities. If the company doesn’t have a blanket contractual liability insurance policy, the conference organizers may suggest an insurer to work with to purchase one.

Special Considerations

A business with a blanket contractual liability insurance policy may still want to purchase a separate liability policy to protect against a specific risk, even if only for the short-term.

It is possible to have blanket broad form contractual liability insurance or blanket limited form contractual liability insurance. Contractual liability coverage was added to 1973 and earlier edition comprehensive general liability (CGL) policies by endorsement. Blanket broad form contractual liability coverage is incorporated into the basic provisions of the 1986 and subsequent commercial general liability (CGL) forms.

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