Definition:Insured contract
📋 Insured contract is a term found primarily in commercial general liability (CGL) policies that defines specific categories of agreements under which one party assumes the tort liability of another — and for which the insurer agrees to extend liability coverage. The concept matters because, by default, many liability policies exclude coverage for obligations a policyholder voluntarily assumes through contract. The insured-contract provision carves out defined exceptions to that contractual liability exclusion, restoring coverage for commonly encountered hold-harmless and indemnification agreements.
⚙️ Under the standard ISO CGL form, the definition of insured contract enumerates several recognized agreement types: leases of premises, sidetrack agreements, easement or license agreements (except in connection with construction or demolition on railroad property), obligations required by municipal ordinance, elevator maintenance agreements, and — most broadly — any contract or agreement pertaining to the named insured's business under which the insured assumes the tort liability of another party to pay for bodily injury or property damage to a third person. Underwriters evaluate the scope of contractual assumptions during the submission process because overly aggressive indemnity clauses can significantly expand the insurer's exposure beyond what the base premium contemplates.
💡 Disputes over whether a particular agreement qualifies as an insured contract rank among the most litigated coverage questions in general liability law. Construction, real estate, and transportation industries routinely rely on contractual risk transfer, and a misalignment between the indemnity clause an insured signs and the coverage the policy actually provides can leave a costly gap. Risk managers and brokers who understand the precise boundaries of the insured-contract definition can structure agreements that preserve coverage, while claims adjusters use the same definition to determine whether a tendered defense obligation falls within policy terms.
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