CONTRACTUAL LIABILITY COVERAGE: STEPPING INTO THE UNKNOWN

James Isbell Thompson
Coe Cousins & Irons LLP

Stephanie Massey
Attorney at Law

Diana Brown
Sam Houston State University

ABSTRACT

When issuing its policy, an insurer might normally assume they know three things for
certain: (1) the identity of the insured; (2) the nature of the insured’s operations; and (3) the types
of exposure to which the policy will be subjected. However, in today’s age of contractual liability
coverage, an insurer may really never know what potential liability it faces. This uncertainty
opens the insurer to a realm of possibilities it may not have contemplated when placing coverage
and determining premiums. Because of this uncertainty, it is important for the insurer to
familiarize itself with the “what ifs.” This paper attempts to provide the reader with a
fundamental understanding of contractual liability coverage. The answers to many of the “what
ifs” are fact-intensive, and often there are no easy answers. This paper reviews cases which
evidence this uncertainty, and demonstrates that even the courts appear to have difficulty
assessing these issues based upon the inconsistent conclusions reached in the jurisprudence.

Keywords: insurance coverage, contractual liability, anti-indemnity statute