“Just sign the contract“…….until it costs you the claim.
In the tourism and hospitality sector, signing contracts with international booking agents, inbound tour operators, and global travel platforms is often the price of admission to stay competitive. But a major issue is frequently overlooked. The very contract that secures the booking can undermine the insurance.
Here is where the issue sits. A General Public Liability (GPL) policy is designed to respond when an insured is legally liable for third-party bodily injury or property damage. However, it will not respond if you have accepted liability under a contract that would not have existed in the absence of that contract.
This is the contractual liability exclusion, and is one of the most material and misunderstood exposures in the sector.
- Without a contract: Liability is based on common law, driven by negligence, fault, and causation.
- With a contract: Liability can be expanded, assumed, or redefined entirely.
When a claim arises, the critical question insurers ask is: Would you have been legally liable if this contract didn’t exist? If the answer is no, the policy is unlikely to respond.
At placement, the policy looks solid. At the claims stage, the contract is what gets tested. If you have agreed to be liable when you wouldn’t have been held liable under common law, your insurer will not automatically follow you there.
As a broker, this is the sentence you need to be comfortable using with your clients: “If you sign this, your insurer may not stand behind you.”
