The term insured contract has a specific meaning under the standard general liability policy. This term includes six categories of contracts. These contracts are covered automatically under the standard liability policy.

An insured contract includes the following types of contracts:

• Lease of Premises: When you sign a lease of premises, the lease gives you the right to use the premises for the purposes outlined in the lease in exchange for a fee. While a lease of premises qualifies as an insured contract, the lease may contain provisions that are not covered by the policy.

For example, suppose that you lease a building from someone else. The lease requires you (the tenant) to indemnify the building owner if you accidentally cause a fire that damages the building. An agreement to indemnify the premises owner for damage by fire is not an insured contract. If you accidentally start a fire that damages the building, and the lease requires you to reimburse the owner for the damage, your policy will not cover that part of the lease. 

Fire damage to rented premises for which you are legally liable under common law (and not because of a contract) is covered by the policy. This coverage is subject to a sublimit a (specific limit that is lower than the policy limit). It is covered under Bodily Injury and Property Damage Liability but is not included under contractual liability.

• Sidetrack Agreement: A sidetrack is a railroad spur, a small piece of railroad track. It gives a business (such as a manufacturer) a direct connection to the main railroad track. A sidetrack agreement is a contract between a business entity and a railroad. The railroad allows the business to use the sidetrack. In exchange, the business promises to indemnify the railroad if the latter is sued by someone who suffers bodily injury or property damage due to the business entity's negligent use of the sidetrack.

• Easement or License Agreement: An easement allows someone to use property that is owned by someone else. For instance, Bill has no direct access to his property from the main road. Jeff lives next door to Bill. The two sign an easement agreement in which Jeff allows Bill to use Jeff's driveway as a means of accessing Bill's house. Bill cannot use the driveway for any other purpose. A license gives someone permission to use property for a specific purpose. For instance, a city gives a person a license to operate a barber shop at a specific location as long as certain requirements are met.
• Obligations Required by Ordinance to Indemnify a Municipality: Cities often pass ordinances requiring any business that is performing a potentially hazardous activity to indemnify the city should it be sued by someone who is injured as a result of that activity. For example, window washing is potentially hazardous, especially on tall buildings. A city ordinance might require all window washers to indemnify the city. If a window washer accidentally injures someone or something while performing his work and the city is sued as a result, the window washer must pay the costs related to the suit. Because of the ordinance, the window washer is required to indemnify the city even though the washer does not have a specific contract with the city.
• Elevator Maintenance Agreement: Building owners often hire elevator servicing contractors to maintain the elevators in their buildings. In a typical elevator maintenance agreement, the contractor agrees to indemnify the building owner in the event the contractor accidentally injures someone or causes property damage, and the injured party sues the owner.
• Blanket Assumption of Tort Liability: This is a catch-all category that includes all contracts in which you (the named insured) assume the tort liability of someone else. That is, it includes any contract in which you agree to indemnify another party for the cost of a claim or suit against that party by someone who has suffered bodily injury or property damage due to your negligence.

For example, suppose that Larry's Landscaping rents a lawn mower from Edwards Equipment. Edwards requires Larry to sign a contract containing an indemnity agreement. In the agreement, Larry promises to indemnify Edwards if Larry's Landscaping accidentally causes bodily injury or property damage to a third party while using the lawnmower, and the injured party seeks restitution from Edwards Equipment. The contract meets the requirements for coverage under Larry's Landscaping's liability policy.

The coverage afforded for the last group of covered contracts is often called blanket contractual liability coverage. The word blanket refers to the fact that all contracts in this group are covered automatically and need not be listed on the policy. The party you agree to indemnify may be virtually anyone (including a municipality) with the following exceptions.

1. An agreement to indemnify a railroad for bodily injury or property damage arising out of construction or demolition operations, within 50 feet of any railroad property. Suppose you are a paving contractor that has been hired by a city to repave a road that crosses a railroad track. Before you can do any work, the railroad will require you sign a contract in which to promise to indemnify the railroad for any injuries or damage you cause to others in the course of your work. The indemnity agreement is not an insured contract under your liability policy.
2. An agreement to indemnify an architect, engineer or surveyor for injury arising out of his or her professional acts. Professional liability is not covered under your general liability policy.
3. Agreements to indemnify someone else for injury arising out of your professional acts as an architect, engineer or surveyor. Professional acts are not covered by your general liability policy, whether they are committed by you or someone else.