Examples of Contingent Liability Insurance


Insurance can get confusing very quickly, especially when there are terms involved that may have related but separate meanings. A contingent liability is one term that often gets mixed up with other types of coverage. Perhaps the alternative term, indirect liability, is more helpful in understanding just how this type of insurance works. It applies to situations where the policyholder is or could be indirectly involved in an event that results in a claim. To facilitate a better understanding of this, here are two contingent liability insurance examples.

Product Warranties

Product warranties are a great example because the party who offers a product declares that they will be responsible for errors or malfunctions within a specified window of time. This gives a clear estimate of how, when, and to what extent the insured party may face a loss. Oftentimes, the party who offers the warranty is not the actual manufacturer, so their hand in creating a faulty product would be indirect.

Construction Contracts

Many companies use contractors to expand their businesses. If someone is injured at a restaurant because something is wrong with the building, they hold the restaurant responsible, not a contracting company. This is another instance of indirect responsibility since the restaurant didn’t actually build a faulty structure.

No matter what type of contingent liability situations you may face, a partnership with an experienced insurance provider will help you cover any possible indirect liabilities.