Define an insured contract under the contractual liability exclusion.

• A. A contract in which the insured assumes tort liability to indemnify a third party for damages arising out of the contract; typically included if specifically listed as insured contract.
• B. A contract in which the insured purchases goods.
• C. A contract that includes insurance terms.
• D. A contract with any third party.

Answer: (C)

Under the contractual liability exclusion, an insured contract is a contract in which the insured agrees to assume the tort liability of another party to pay for damages that arise out of the contract, typically through an indemnification clause. This means the insured takes on responsibility for injuries or property damage that would otherwise be owed by the other party, but only to the extent that such liability would exist without the contract. This is not about merely purchasing goods, including insurance terms, or any contract with any third party—the key element is the indemnity/assumption of liability for contract-related damages.