Understanding Contractual Liability in General Liability Coverage

Contractual liability is a crucial component of insurance coverage that directly impacts a vendor’s ability to meet VIVE compliance requirements—especially when Additional Insured (AI) coverage is involved.

What is Contractual Liability?

Contractual Liability refers to the assumption of liability for damages or claims that a business agrees to under a contract or agreement. This type of liability is not automatically included in every Commercial General Liability (CGL) policy and must often be explicitly confirmed.

In simpler terms: If a vendor signs a contract promising to indemnify a property owner or client, their insurance policy must contain contractual liability coverage to support that obligation.

Why It Matters in VIVE

VIVE clients often require vendors to list them as Additional Insureds on their General Liability policies. However, Additional Insured coverage is not valid unless Contractual Liability is included in the underlying policy.

Without this coverage:

• A vendor may be unable to meet client contract obligations.

• The Additional Insured may be left without protection if a claim arises.

• The COI may be considered non-compliant and result in vendor suspension.

What Vendors Should Do

Vendors should ensure that Contractual Liability is included in their Commercial General Liability insurance and that it is reflected clearly on the Certificate of Insurance (COI).

Steps to Confirm:

1. Ask their insurance agent if Contractual Liability is included in the GL policy.

2. Have the agent list it as a covered item in the General Liability section of your COI.

3. Ensure the COI still lists all other required elements, including:

   • Policy limits

   • Additional Insured endorsement (Ongoing and/or Completed Operations)

   • Primary and Non-Contributory language (if required)

Compliance Tip

No Contractual Liability = No Valid Additional Insured Coverage
Even if a vendor lists a client as an Additional Insured, the protection does not apply unless Contractual Liability exists in the policy language.

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