Liability insurance

Liability insurance

Liability insurance is a form of insurance which covers the insured against the risk of incurring liability to a third party. It is as much a form of indemnity insurance as property insurance. However, whereas under most forms of property insurance the insurer undertakes to pay the amount of the loss suffered by the insured as a result of the damage or destruction of the insured property, the insurer under a liability policy undertakes to indemnify the insured against the amount of the liability which it incurs to the third party. The insured’s loss is thus the incurring of the liability.

For more information on the characteristic features and different types of liability insurance, together with guidance on commonly arising issues, see Practice Note: Liability insurance—essentials.

It is common for liability insurance policies to operate on a ‘claims made’ basis, requiring insureds to notify insurers of claims or circumstances that may give rise to a claim. Failure to do so in proper accordance with the relevant notification provisions in the policy may result in an insured being unable to recover under it.

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