Blanket Contractual Liability Insurance: What It Is, How It Works

Blanket contractual liability insurance is a type of liability insurance that covers all contracts in which the insured assumes liability. When a business is collaborating with a third party, especially if the third party is using the business's property, blanket contractual liability insurance is most typically used.

How Blanket Contractual Liability Insurance Works

Blanket contractual liability insurance is intended to apply automatically to any agreement that a business may enter into. Businesses are eager to accept payment from other businesses, but they are considerably less prepared to take the dangers that come with the agreement. A firm may force other businesses to maintain various forms of liability insurance coverage in order to protect itself.

These plans cover both the insured and the parties with whom the insured collaborates. The coverage is intended to compensate or "hold harmless" another person or entity for activities that are not expressly prohibited by the insurance policy.

In most circumstances, a company must demonstrate that it has insurance by a certain time. If the deadline passes without proof, the company will be unable to commence work. Other parties may be required to be added to the policy to safeguard the company from danger.

Example of Blanket Contractual Liability

A major, multi-day software industry conference, for example, allows enterprises to demonstrate their offerings in the exhibition hall. Exhibitors bring their own displays and set up their own booths. To be permitted to exhibit, the participating company may be required to produce proof of commercial liability insurance, contractor's personal injury insurance, and blanket contractual liability insurance.

The conference may demand policy limits that exceed a certain threshold, both for per-occurrence and aggregate liability. If the company does not already have a blanket contractual liability insurance coverage, the conference organizers may recommend an insurer with whom to cooperate to obtain one.

Special Considerations

Even if a company has a blanket contractual liability insurance coverage, it may choose to buy a secondary liability policy to protect against a specific risk, even if just for a short time.

It is possible to have either blanket broad form or blanket limited form contractual liability insurance. By endorsement, contractual liability coverage was added to 1973 and earlier edition comprehensive general liability (CGL) policies. The core provisions of the 1986 and subsequent commercial general liability (CGL) forms include blanket broad form contractual liability coverage.