Insured Contract

An insured contract is a term of art defined in the standard Commercial General Liability policy. The CGL contains a broad exclusion for liability the insured assumes under a contract, but it then carves back coverage for liability assumed under an "insured contract." The definition lists six specific categories, including leases of premises, sidetrack agreements, easement or license agreements, obligations to indemnify a municipality, elevator maintenance agreements, and — most importantly for most businesses — the tort liability of another party assumed in a written business contract or agreement.

For a small-business buyer, the insured-contract concept is what makes a signed hold harmless agreement actually insurable. When your customer's or GC's contract requires you to indemnify them for bodily injury and property damage arising from your operations, that assumed liability generally falls within the "insured contract" definition, so your CGL responds. Without this carve-back, the contractual-liability exclusion would leave you personally funding indemnity promises you make every time you sign a lease or subcontract. This is the plumbing behind everyday contractual liability coverage.

The nuance is that not every indemnity you sign qualifies. The definition covers tort liability of another assumed in a contract — it does not turn the CGL into a performance guarantee, and it will not cover assumed liability for pure economic loss, professional services, or another party's breach of contract. Reading a contract's indemnity language against the insured-contract definition — and against the indemnity concept generally — is how a broker confirms your promises are actually backed.