Liability · Insurance Term
Contractual Liability
Definition
Contractual liability is legal responsibility you take on by signing a contract, such as agreeing in a lease or service agreement to defend and pay for another party's injury claims. A general liability policy covers some of these promises, but only those that fit the policy's definition of an insured contract.
In Plain English
Leases, management agreements, vendor contracts and construction contracts often include a hold harmless agreement. In it, one party agrees to protect the other from claims. Without insurance behind it, that promise is paid from your own pocket.
The standard commercial general liability form excludes liability you assume by contract, then gives some of it back. It covers liability assumed in an insured contract. That definition includes a lease of premises and the part of a business contract where you take on another party's legal liability for bodily injury or property damage. Promises outside that definition, like guaranteeing performance, are usually not covered.
Owners see this from both sides. You may ask tenants and vendors to indemnify you, while lenders or anchor tenants may ask you to indemnify them. The broader the wording, the more important it is to confirm your policy will stand behind it.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical and simplified: A landscaping contract requires the vendor to defend and indemnify the property owner for injuries arising from the vendor's work. A visitor trips over a hose the crew left out and sues the owner for $150,000. If the contract qualifies as an insured contract, the vendor's general liability policy may respond to the vendor's promise, subject to its terms and limits.
Why It Matters for Texas Property Owners
In construction contracts, Texas law voids many provisions that make one party indemnify another for that party's own negligence (Ins. Code §151.102), with some exceptions. Texas courts also generally enforce an indemnity for a party's own negligence only if the contract says so expressly and conspicuously. Have a Texas attorney review indemnity language, and have your agent review how your insurance lines up with it.
What to Watch For
- Read the indemnity and insurance sections of every lease and vendor contract before you sign.
- Ask whether your liability policy changes the standard insured contract definition, since some endorsements narrow it.
- Make sure the parties who indemnify you carry insurance that supports the promise, and get proof.
- Ask an attorney whether an indemnity clause is enforceable as written.
Sources
Last updated October 14, 2026 · Primesure editorial team · How We Write