Bharti AXA INSURANCE GLOSSARY Contingent Liabilities Contingent Liabilities A contingent liability is a liability that may occur in future based on the outcome of a probabilistic event. Such a liability may be recorded in a financial statement of the event is likely to occur and the liability can be reasonably estimated. For example, if a company offers a product warranty and finds out after shipping that 10% of the products had a manufacturing defect. In such a case, the future liability from product warranties can be estimated accurately and is very likely to occur. Therefore, it can be accounted for as a contingent liability and funds set apart to honour the same without making an immediate cash payment. Here is an hypothetical example: Consider a hotel chain that hires a contractor to build a new hotel. A person walking past the construction site gets injured due to the contractor’s negligence. Now, when the person files a claim against the contractor, the hotel chain may also be held liable for the accident. Typically, the hotel chain cannot be held liable for the actions of the independent contractor unless: The operations for which the independent contractor was hired were illegal The operations for which the independent contractor was hired were inherently hazardous The nature of the job is such that the authority cannot be delegated. Request Call Back Category * - Select -CarTwo WheelerHealthTravelPersonal Accident Buy Renew Claim submit Related Posts Disclaimer : The information published on this website is for the public's reference only. Content of this information is to provide an overview of your Travel needs and should not be relied upon for personal, medical, legal or financial decisions and you should consult an appropriate professional for specific advice. Bharti AXA General Insurance Company Limited makes no representations about the suitability, reliability, timeliness, and accuracy of the information, travel, services, or any other items mentioned on this subject for any purpose whatsoever.