Contractual liability · PI

Contractual liability treatment — UK PI

Reviewed by Apex Insurance Brokers (FCA FRN 724952) · Published 15 July 2026

Standard UK PI wordings usually exclude liability assumed under contract that exceeds civil-liability-at-law. But contractual extensions are widely available — and matter more than ever in modern commercial contracts.

The default position

Civil-liability PI wordings cover liability at law — negligence, breach of statutory duty, etc.

Liability assumed under contract that exceeds these common-law duties is usually excluded.

This is the 'contractual liability exclusion' — often clause 4.2 or similar in the wording.

It protects insurers against firms taking on wide-ranging contract liabilities without insurer knowledge.

Why the exclusion matters in modern practice

Modern commercial contracts often contain broad indemnity clauses.
'Best-of-breed' or 'utmost skill and care' provisions may exceed common-law standards.
Extended warranty and hold-harmless clauses expand contractual liability.
Public procurement contracts often demand wide indemnity provisions.
US-influenced contracts sometimes use hyper-broad indemnity language.

Contractual liability extensions

Named-contract extension: cover specifically listed contracts.
Named-client extension: cover contracts with specific major clients.
General contractual liability extension: broader cover for reasonable contract-assumed liability.
Sub-limits or caps often apply to the extension.
Additional premium typically 10-25% of base premium for full extension.

Practical discipline

Read every material contract's indemnity provisions.
Flag contracts with liability provisions exceeding common-law standard.
Approach broker with specific contract wordings for cover assessment.
Where possible, negotiate the contract's indemnity language down to insurable terms.
Where contract terms are non-negotiable, discuss extension options.

Common contract clauses that trigger this

'Best skill and care' vs 'reasonable skill and care'.
'Fit for purpose' warranties.
Uncapped indemnity provisions.
'Any losses arising' language.
Extended limitation periods beyond statutory.

Frequently asked

Why do PI policies exclude contractual liability?

To prevent firms taking on unlimited contractual liability without insurer knowledge or pricing.

Is a contractual liability extension always available?

Widely available but comes at a cost. Bespoke risks may require specific arrangement.

Does the extension cover everything?

Usually not — typically excluded are fraudulent behaviour, unlimited indemnity, or express guarantees.

What about SRA MTC contracts?

SRA MTC wording is standardised — the exclusion works differently here. Broker guidance.

How much does the extension cost?

10-25% additional premium for a general extension. Named-contract extensions can be more modest.

What if I sign a contract before checking?

Notify broker immediately. Sometimes retrospective cover is available; sometimes it isn't.

Speak to a specialist broker

Get a considered PI quote from Apex

Get a quote Speak to a broker

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. Registered in England and Wales, company number 07014570.

Offices: QCS, 53 Queen Charlotte Street, Bristol BS1 4HQ · Unit 24, Basepoint Centre, Jubilee Close, Weymouth DT4 7BS