What does contractual liability insurance cover?

• A. Coverage for professional liability claims arising from design errors
• B. Coverage for injuries in the office
• C. Coverage when you are held responsible due to signed contracts
• D. Coverage for property damage to your own building

Answer: (C)

Contractual liability coverage protects the liability you incur specifically because of obligations you assume in a contract—things like indemnification or hold-harmless clauses. It steps in when you are legally responsible for damages or losses because the contract requires you to be, not for damages from your own separate negligent acts or for other types of risk.

For example, if a contract obligates you to reimburse a client for certain losses arising from your work, contractual liability coverage would respond to those claims (defense and potential settlement) up to the policy limits.

This is different from coverage for professional mistakes (that’s professional liability), injuries that occur on your premises (premises/general liability or workers’ comp), or damage to your own property (property insurance).