Liability insurance

Overview of Liability Insurance

Liability insurance is intended to indemnify an insured for damage claims brought by third parties as a result of some action of the insured. Claims of negligence and claims stemming from products or completed operations are often the subject of liability insurance claims. Intentional damages and contractual liability are not typically covered under liability insurance policies.

Broadly speaking, Liability insurance falls into these categories: Premises Liability, Auto Liability, Professional Liability and Products/Completed Operations Liability. In commercial insurance terms Products, Premises, and Completed Operations coverage are often grouped into the "General Liability" category.

Most often Auto and Premises Liability insurance covers Bodily Injury or Property Damage as a result of an insureds negligent actions. As an example, an insured who drives their vehicle through a red light and strikes another vehicle might be held liability for property damage to that vehicle and any injuries sustained by it's occupants. Auto Liability on the insureds vehicle would indemnify that insured for his or her legal responsibility for those damages.

Products and Completed Operations coverage protects insured against claims made against them due to injuries caused either by the products or by an operation that they have completed. Manufacturers and retailers need Products Liability protection, while contracters, road builders, etc., are in need of Completed Operations coverage.

An important and often overlooked aspect of Liability Insurance is the insurance carriers duty to defend an insured against claims that are covered by the policy. The cost of a defense is typically not limited by the policy limits, and can be significant where there is a disagreement as to either fault or the amount of damages.

Liability insurance is often referred to as "third party" coverage. This is because payment is not typically made to the insured, but rather to someone who is not a party to the insurance contract.