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Liability Insurance Claims

If the tree in your backyard falls on your neighbour’s shed, your dog bites a pedestrian, your employee is injured at work or your product causes damage or injury, then liability insurance is what you need to protect you from potentially expensive lawsuits and claims. Liability insurance for individuals or businesses protects policyholders from financial risk if they are sued and held legally liable for injuries caused to others or property damage as a result of an accident, negligence or malpractice. Payments by the insurer are made to the third party who has suffered damage or injury, not to the policyholder.

Liability insurance is often included in a general homeowner’s, auto or commercial insurance policy. It may also be a separate specialized policy as in professional liability or malpractice insurance (for medical and dental practitioners, lawyers, architects, engineers and other professionals offering services to the public). Product liability insurance protects manufacturers from the cost of claims resulting from a faulty product causing injury or damage to the purchaser or the public. Business liability insurance covers employers if an employee is injured while at work. Public liability insurance protects owners and operators of locations which attract large numbers of the public, such as shopping malls, hotels, clubs and sports venues.

In some states liability insurance is compulsory for drivers of vehicles, employers, manufacturers and those who offer professional services to the public. In others it is optional. Some states allow drivers to post a bond in place of taking out auto liability insurance and permit low policy limits in return for low premiums for low income drivers. Liability coverage will often specify separate maximum coverage limits for injury to one individual, all individuals affected by a single incident and property damage.

Liability insurance covers both legal costs and legal payouts. If a policyholder is sued, the insurance company can choose to defend the insured and take the suit to court to establish fault and the amount of damages. The legal costs are not limited by policy maximums.

Intentional damage and contractual liabilities (for example if a contract specifies damages if there is a missed deadline) tend to be excluded from liability insurance policies.

If you are a business owner serving the public, an employer, a manufacturer, a professional offering services to the public, a dog owner or a homeowner, liability insurance can protect you from the risk of bankruptcy in the event that you are sued for injury or damage to a third party.