Linguistically, “contractual liability” and “vertragliche Haftung” are
equivalents. However, market practices for “contractual liability” in the United
States and “vertragliche Haftung” in Germany can differ markedly.
In the United States, the standard liability wording drafted by Insurance Services Office,
Inc. — which prepares standardized policy forms for virtually all property/casualty
insurers in the United States — includes basic contractual liability. Under that
wording, coverage is restricted to “insured contracts.” These contracts are
defined as leases for premises (excluding liability for fire), sidetrack agreements,
easement or license agreements (excluding construction or demolition operations or
operations within 50 feet of a railroad), obligations toward municipal entities (excluding
work performed for such entities), elevator maintenance agreements, or any other
agreements — involving the assumption by the insured of a third party’s tort
liability to another third party — relating to the conduct of the insured’s
business.
Thus, the intent of the standard wording in the United States is to cover the
insured’s assumption of a third party’s legal liability — that is,
liability imposed under law in the absence of any contract or agreement — to another
third party. In other words, the coverage comes into play when one party, the indemnitor,
in this case the insured, agrees to indemnify another party, the indemnitee, for the
latter’s legal liability to a third party.
German standard liability conditions, Allgemeine Versicherungsbedingungen für die
Haftpflichtversicherung (known in the market by the initials AHB), exclude any liability,
assumed by an insured under contract or other agreement, that goes beyond the
insured’s legal liability (“gesetzliche Haftung”).
Coverage for contracts comparable to “insured contracts” in the ISO wording
— that is, assumption of a third party’s legal liability to another — are
standard extensions in Germany and can be obtained easily. Examples of such contractual
liabilities are the basic responsibilities of a landlord
(“Verkehrssicherungspflicht”) under a lease or rental agreement or hold-harmless
agreements with the German Federal Railway.
Up to this point, market practices for “contractual liability” in the United
States and “vertragliche Haftung” in Germany are similar. Both refer to the
assumption of a third party’s legal liability to another.
The difference in market practice arises in relation to industrial companies.
In Germany, large manufacturers and even mid-sized suppliers to certain industries such as
the automobile industry have a contractual liability exposure far broader than that faced
by similar companies in the United States.
In the course of business, German companies may find themselves in a position where they
have to assume liabilities for their own acts or omissions that go beyond their legal
liability. These can include strict liability (“verschuldensunabhängige
Haftung” or “reine Gefährdungshaftung”) or liabilities arising out of
purchase agreements (“Einkaufsbedingungen”) or the offer of extended product
warranties of up to 10 years.
Insurers in Germany are willing to write contractual liability coverage for such exposures
for certain insureds. It is market practice to write such coverage on a specific, not a
blanket, basis.
Because these contractual liability exposures do not exist in the United States,
German-style contractual liability coverage is not written in the United States.
Thus, a U.S. policy covering manufacturing or sales operations in Germany may offer
inadequate protection for the contractual liability exposures normally found there.
Additional protection may be needed for the obligations arising in connection with
contracts drafted in accordance with German business practices.
