Liability · Insurance Term
Insured Contract
Definition
An insured contract is a type of agreement that a general liability policy treats as covered, even though the policy otherwise excludes liability you take on by contract. It commonly includes leases, easements and agreements where you take on another party's liability for injuries or damage.
In Plain English
A general liability policy usually excludes liability you assume under a contract. The main exception is for contracts that fit the policy's definition of an insured contract. When a contract qualifies, your promise to pay for someone else's injury or damage claims can be covered through contractual liability coverage.
The standard CG 00 01 Commercial General Liability Coverage Form defines insured contracts to include items such as a lease of premises, an easement or license agreement, and the part of other business contracts where you take on another party's tort liability. Tort liability means legal responsibility for injuries or damage, not for things like unpaid bills. Some endorsements narrow this definition, which can leave common lease promises uncovered.
This matters most when you sign a hold harmless agreement or indemnity clause. If your policy has a narrowed definition, a promise you made may not be backed by insurance.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a shopping center owner signs a contract promising to cover a sign company for injuries at the property. A pedestrian is hurt and sues the sign company. If the contract is an insured contract under the owner's policy, the owner's insurer may respond to that promise, subject to the policy terms.
What to Watch For
- Ask whether your policy uses the standard insured contract definition or a narrowed one.
- Have contracts reviewed before signing, especially broad indemnity promises.
- Know that a contract promise to pay for someone's breach of contract is generally not covered.
- Confirm how defense costs for the other party are handled.
Last updated October 14, 2026 · Primesure editorial team · How We Write