Businesses frequently enter into contracts with suppliers, vendors, independent contractors, landlord/tenants, and other service providers. In those contracts it is common to find language which transfers the liability of one party to the other in the event that bodily injury, property damage (tangible and intangible) and other liabilities arise out of the contractual relationship.
The liability may involve both insurable and non-insurable liabilities upon the contracting parties. The contracting parties, and their supporting legal and risk advisors should review in detail the contractual language and what liabilities may be assumed due to the contract.
Contractual Risk Transfer is one of the five traditional risk management techniques within a business. These techniques include: Risk Retention, Risk Control, Risk Avoidance, Insurance Transfer & Contractual Transfer.