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Contractual Liability in your Small Business Insurance Quote

Your small business insurance quote should all include coverage for contractual liability. Contractual liability usually arises from any breach of a contract or some kind of hold harmless indemnity agreement. Not all carriers offer this coverage and there are many exclusions even if the coverage is issued.

  • Breach of contract
    . This typically is when you are someone within your company fails to produce some task that was promised. The claimant/plaintiff can bring damages against you for this breach of contract. They may also seek a remedy of specific performance which means that you could be required by the court to perform the task that was promised and you failed to perform. Usually general liability insurance does not cover these types of breaches. The appropriate insurance form to use for this type of breach would be a performance bond. Liability insurance for small business can be endorsed to cover contractual liability bodily injury or property damage claims. A general liability insurance policy will respond to these types of claims, if properly endorsed.
  • Hold harmless indemnity agreements. These agreements will obligate the indemintor to pay certain claims or losses that have been contractually assumed by the Indemnitee. The agreement to have these clauses creates liability for the Indemnity for contractual liability and normally the small business insurance providers will provide coverage for this exposure. Some states prohibit hold- harmless agreements and they are not enforceable in those states. The vast majority of the states will enforce the typical hold harmless indemnity agreement. The contractual liability coverage will sometimes require small-business workers compensation insurance that has both hold harmless indemnity agreements for jobs that you’re performing. Many times the insurance carriers will make a charge for providing this agreement in advance.

If you are required to have small-business errors and omissions insurance with a hold harmless indemnity agreement that can sometimes be problematic. Small business professional liability insurance is covering you as the individual and your company and its typically not extended even to cover others even if you agreed to a hold harmless indemnity agreement. Contractual liability agreements versus contractual liability insurance coverage can be worlds apart. While you as the client can, if you agree to, sign any contractual provisions that you so desire, that does not necessarily mean that the contractual liability coverage with your insurance policy will respond to each and every contract provision that you’re signing. There is normally very little charge with regards to premium for this coverage so it would behoove you as the client to make sure that you have this coverage included in your insurance portfolio.

Breach of contract and hold harmless indemnity agreements can both play an important part in your overall insurance coverage design; at the very least have them included in your small business insurance quote. If you know that normally breaches of contracts are not covered in your insurance program while hold harmless and indemnity agreements typically are covered can help you in the negotiating of all of your contracts. You can save money in the long run if you know where your coverage starts and stops.

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