Insurance Law Lesson 32: Contractual Liability Standard liability policies exclude coverage for contractual liability. The ISO CGL exclusion bars coverage for claims of bodily injury and property damage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contractor agreement.” But, there are exceptions! Liability that the insured would have even if there was no contract is not excluded. So, if a contractor agrees to not damage anything else (which would be “property damage” caused by an “occurrence”) while doing his work, this exclusion does not bar coverage for damage caused by negligence. The other exception is for “insured contracts” in which the insured agreed to accept the liability of another party. But, “insured contract” needs to be its own lesson.