An insured contract under a CGL policy is one of six specific types of agreements that your Commercial General Liability policy carves out from its contractual liability exclusion, allowing coverage to apply to liability you took on for someone else by contract. If your indemnity agreement fits one of those six categories, your insurer generally has to respond to the assumed liability. If it doesn’t fit, the contractual liability exclusion applies and you’re on the hook alone.
Why the Definition Matters
Every standard CGL policy excludes liability you assumed in a contract. The reason the policy still pays most indemnity claims is a single exception written into that exclusion: it doesn’t apply to liability assumed under an “insured contract.”1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition Everything turns on that defined term.
There is a second, separate exception worth knowing about: liability you’d have even without the contract remains covered. If you negligently injure someone on a job site, your CGL responds whether or not your subcontract required you to hold the general contractor harmless. The insured contract analysis matters when the only reason you owe money is that you promised to pay it.
When the insured contract exception does apply, it reaches further than many policyholders realize. Reasonable attorney fees and litigation costs incurred by the other party to the contract count as covered “damages,” provided you assumed liability for that party’s defense costs in the same contract and those costs relate to a suit alleging covered bodily injury or property damage. In practice, that means your CGL insurer can end up paying the indemnitee’s defense as well as yours.
The Six Categories That Qualify
The ISO CGL form lists six specific agreement types that count as insured contracts. The first five are narrow. The sixth does most of the work in real-world commercial contracts.
Lease of Premises
A commercial lease qualifies. Almost every lease makes the tenant indemnify the landlord for liability tied to the tenant’s use of the space, and this category is what lets your CGL respond.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
Watch the fire-damage carve-out. The part of a lease that indemnifies the landlord for fire damage to the rented premises is specifically excluded from the insured contract definition.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition Your CGL handles fire damage to rented premises through a separate coverage grant with its own sublimit on the declarations page. If your lease pushes fire liability beyond that sublimit, you have a gap.
Sidetrack Agreements
An agreement between a railroad and a business using a rail spur on or near its property qualifies. Most companies never see one. Manufacturers, warehouses, and distributors with rail access do.
Easement or License Agreements
Liability assumed under an easement or license agreement qualifies, with one exception: the agreement can’t involve construction or demolition work on or within 50 feet of a railroad.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
Municipal Indemnity Required by Ordinance
When a city or county ordinance requires you to indemnify the municipality as a condition of getting a permit or license, that obligation qualifies. If the indemnity instead relates to work you’re performing for the municipality, this category doesn’t apply.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition The catch-all picks that situation up through a specific inclusion for indemnifying a municipality in connection with work performed for it.
Elevator Maintenance Agreements
An elevator maintenance agreement qualifies. Building owners routinely require maintenance contractors to indemnify them for injuries tied to elevator use or upkeep, and this category makes sure the contractor’s CGL answers.
The Tort Liability Catch-All
The sixth category is any other contract pertaining to your business under which you assume another party’s tort liability to pay for bodily injury or property damage to a third person or organization.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition Most construction indemnity clauses, vendor agreements, and service contracts live here.
Two phrases do the heavy lifting. “Pertaining to your business” means the contract must connect to your commercial operations; an indemnity you sign in a personal capacity doesn’t qualify. “Tort liability” is defined as liability that would exist by operation of law even without any contract.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
The Tort Liability Line Trips People Up
This is where most coverage disputes start. If you agree to indemnify a property owner for slip-and-fall claims caused by your work, you’re assuming their tort liability. They’d owe that duty to injured visitors regardless of your contract. That qualifies.
If you guarantee a project’s completion date and agree to pay damages for delay, that’s purely contractual liability. No tort duty exists to finish on schedule. The indemnity isn’t for tort liability, so it isn’t an insured contract, and the CGL won’t respond. The same reasoning blocks coverage for liquidated damages, warranty obligations, and economic-loss promises that have no tort analog.
Carve-Outs Inside the Definition
Even within the catch-all, three types of agreements are excluded. A contract can look like it qualifies and still fall outside.
- Agreements to hold a railroad harmless for bodily injury or property damage from construction or demolition within 50 feet of railroad bridges, trestles, tracks, roadbeds, tunnels, underpasses, or crossings. Railroads typically require separate specialized coverage for this.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
- Agreements to indemnify an architect, engineer, or surveyor for errors in professional work, including preparing drawings, reports, or specifications, or giving or failing to give project directions that primarily caused the injury.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
- Agreements under which an architect, engineer, or surveyor assumes liability for their own professional services or failure to render them, including supervisory and inspection activities.1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition
The common thread: a CGL isn’t a professional liability policy. If the underlying exposure is a design or professional-services failure, the CGL pushes you toward an errors-and-omissions policy instead.
Check Your Policy for the CG 24 26 Endorsement
The base ISO form’s catch-all is broad. It covers tort liability you assumed by contract whether or not you actually caused the injury. In 2004, ISO introduced the CG 24 26 endorsement to narrow that scope.
The endorsement rewrites the catch-all so that the bodily injury or property damage must be “caused, in whole or in part, by you or by those acting on your behalf.”1Independent Insurance Agents of Texas. Amendment of Insured Contract Definition The practical effect is significant. Under an unendorsed policy, if you agreed to indemnify a general contractor and someone was hurt entirely because of the GC’s negligence, your CGL still responds because you assumed the GC’s tort liability. With CG 24 26 attached, your insurer can deny the claim unless you or your people were at least partly responsible.
The endorsement is common and often goes unnoticed by policyholders. If your business routinely signs indemnity agreements, pull your endorsement schedule and look for CG 24 26. Its presence changes what your contractual liability coverage will actually pay.
State Anti-Indemnity Statutes Can Void the Whole Thing
Even when an agreement checks every box in the insured contract definition, state law can make the underlying indemnity unenforceable. Roughly 45 states have anti-indemnity statutes, primarily aimed at construction contracts.
Indemnity agreements fall into three categories: limited (the indemnitor covers only its own negligence), intermediate (the indemnitor covers its own negligence and shared fault, but not the indemnitee’s sole negligence), and broad (the indemnitor covers everything, including the indemnitee’s sole negligence). About 17 states prohibit broad-form indemnity in construction contracts. Roughly 24 others go further and also ban intermediate-form indemnity, leaving only limited indemnity enforceable. A handful of states still permit broad-form agreements.
Your CGL can only cover liability you’ve validly assumed. If your state’s statute voids the indemnity clause, there is nothing for the insured contract provision to attach to. The agreement can look like a textbook fit for the catch-all and still produce no coverage because the indemnity itself is unenforceable. Review indemnity language with an attorney who knows your state’s rules, particularly in construction.
Insured Contract Coverage Is Not the Same as Additional Insured Status
Businesses often mix these up. They do different jobs.
When your contract qualifies as an insured contract, your CGL covers the liability you assumed. The coverage runs through you. The other party isn’t an insured on your policy, has no direct right to demand a defense from your insurer, and benefits only because you’re paying what you promised to pay.
When someone is added as an additional insured through an endorsement like ISO CG 20 10, they become an insured in their own right. Your insurer may owe them a direct defense. Additional insured coverage, though, is typically narrower in scope and may be limited to injuries arising from your ongoing operations or caused at least partly by your acts or omissions.
Most well-drafted risk transfer arrangements use both: the upstream party requires additional insured status on the downstream party’s CGL and also requires an indemnity agreement that qualifies as an insured contract. Together they close gaps that either device alone can leave open.