Do I need business liability insurance if the contract has a liability clause?

UPDATED: Oct 1, 2022

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Do I need business liability insurance if the contract has a liability clause?

Do I need business liability insurance if I’m a sole proprietor and the only contract I have specifically says that both parties are not liable for any damages as a result of the contract or associated services?

Asked on May 15, 2018 under Business Law, Maryland


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

YES!!!! Sorry to be so emphatic, but you definitely need the insurance--such a waiver of the right to sue you will not hold up under certain circumstances, such as if the other side can convince a court you committed fraud (lied to them) to get them to sign, or if you can be shown to have intentionally acted in some way causing them liability or deprive them of the benefits of the contract (you are not allowed to deliberately do wrong while denying the other side recourse), or if you breach (violate) the contract in some material (important) way, since such a breach would let the other side treat the contract as terminated entirely and escape all its provisions...that is, the contract only protects you if the contract remains in full force and  effect, and there are too many circumstances that can void or terminate a contract to rely on that. You  are a sole proprietor: that means that if they can get around the contract, *you* are personally liable--i.e. you own house, money in the bank, etc. is at stake. The contract certainly helps, but get the insurance, too.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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