Assumed Liability

What Does Assumed Liability Mean?

An assumed liability is a liability that one party agrees to take on under the terms of a contract. In the context of insurance, policies are available to protect against losses resulting from an assumed liability.

Companies that take on assumed liabilities through a contract often look at a general liability insurance policy, since standard CGL forms typically include coverage for liability assumed under an insured contract.

Assumed liabilities are also referred to as contractual liabilities.

Insuranceopedia Explains Assumed Liability

If a company takes on multiple assumed liabilities under the terms of a new contract, it could face significant risk if it does not purchase assumed liability insurance. For example, if a construction company assumes liability for the safety of a government-owned road while working on it, the company could be held responsible for any injuries that occur on the road during its closure and construction. In this case, it would be the construction company’s responsibility to ensure the area remains safe, and it would need to purchase assumed liability insurance to be covered in the event of an accident.

Contractors working under agreements that shift responsibility onto them should also review their independent contractor insurance options before signing, since coverage for assumed liabilities is not automatic and varies by policy form.