Importance of Liability Clauses in Business Contracts

“Do you use your standard contract with your customers that includes a limitation of liability clause and/or hold harmless agreement?”

When applying for liability insurance, you’ll find this question on pretty much all insurance carrier applications.

If you do not use a standard contract or agreement with your customers/clients and they do not include limitation of liability clause and/or hold harmless agreement, chances are you’ll

1- Be declined by carriers
2- pay higher premiums
3- or deal with an array of coverage limitations/exclusions.

Best Practice Recommendation:

-Use written contracts consistently, especially for higher-value jobs or services.

• Include at minimum: Limitation of liability, Indemnification/hold harmless clause, Insurance requirements for the other party.

Have contracts reviewed by a qualified business transactional attorney to ensure enforceability.

Having these measures in place not only protects your business—it also signals to insurers that you manage risk proactively.

All this can save your business from extreme financial risk. Added bonus, less insurance premium and better coverage.

-JK