Liability Insurance is a part of the genral insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy.
Originally, individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement). The modern system relies on dedicated carriers, usually for-profit, to offer protetction against specified perils in consideration of a premium.
Liability insurance is designed to offer protection against third party insurance claims, i.e. payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to soar when cases go to trial.
Types of Liability Insurance
In many countries, liability insurance is a compulsory form of insurance for those at risk of being sued by third parties for negligence. the most usual classes of mandatory policy cover the drivers of vehicles, those who offer professional services to the public, those who manufacture products that may be harmful, constructors and those who offer employment.
The reason for such laws is that the classes of insured are deliberately engaging in activities that put others at risk of injury or loss. Public policy therefore requires that such individuals should carry insurance so that, if their activities do cause loss or damage to another, money will be available to pay compensation. In addition, there are a further range of perils that people insure against and, consequently, the number and range of liability policies has increased in line with the rise of contingency fee litigation offered by lawyers (sometimes on a class action basis). Such policies fall into three main classes:
Depending on State and or country certain categories of the above are compulsory.
Many of the public and product liability risks are often covered together under a general liability policy. These risks may include bodily injury or property damage caused by direct or indirect actions of the insured.
In the United States, general liability insurance coverage most often appears in the Commercial General Liability policies obtained by businesses, and in homeowners' insurance policies obtained by individual homeowners.
If your enquiry relates to Liability Insurance, please specify the nature of your request including any supporting information and contact us.