What Does Contingent Liability Mean?
Contingent liability is liability that a company or corporation is responsible for due to being contractually bonded to the party at fault. In other words, contingent liabilities are not caused by the employees or other members of a company. They are caused by independent contractors or members of other companies that the company is doing business with in some capacity.
Insuranceopedia Explains Contingent Liability
Even though contingent liabilities are not directly a company's fault, they still can cost the company a lot of money in damages from lawsuits. A good commercial general liability policy can help companies hedge their risks against contingent liabilities. An example of a situation where a company may have contingent liability is a hotel that hires an elevator repair company to fix its elevators. If the elevator repair company causes an elevator related injury in the hotel, both the elevator company and the hotel could be liable. In this case, the hotel would have contingent liability.