A contract can hold the contractor liable for damages; which type of insurance may cover this liability?

Contractual liability insurance is specifically designed to address the liabilities that may arise from contracts. This form of insurance provides coverage for obligations that a contractor agrees to in the contract, including any damages or injury that may occur as a result of fulfilling those contract terms.

In this context, if a contractor is held liable for damages through the stipulations of a contract, contractual liability insurance can step in to cover those financial responsibilities. This type of insurance is particularly relevant in industries where contracts are commonplace, as it mitigates the risk associated with obligations that could lead to significant liability.

While general liability insurance can cover a wide range of liabilities, including bodily injury and property damage claims, it is not specifically tailored for obligations outlined in contracts. Performance bonds are used to ensure that the contractor completes a project and fulfills its contractual obligations but do not provide liability coverage. On the other hand, workers' compensation insurance covers employees' work-related injuries but does not extend to contractor liability regarding damages to others as specified in contracts.

Thus, contractual liability insurance stands out as the appropriate option for covering a contractor's liability stemming from contractual agreements.