Does a Significant Deviation between the Index Price and the Contract Price Always Trigger a Liquidation?

No, a deviation between the Index Price and the contract's Last Traded Price does not directly trigger liquidation. Liquidation is triggered when the Mark Price, which is based on the Index Price, causes the position's equity to fall below the maintenance margin.

A large deviation will, however, lead to a high funding rate, which incentivizes arbitrage and pushes the contract price back towards the Index Price.