Liability Claim
What Does Liability Claim Mean?
A liability claim arises when an insured individual contacts their insurance company for help or financial assistance in response to a third party’s allegation that the insured is responsible for a loss or damage.
During the course of daily life or business operations, an insured may engage in actions that could potentially cause financial loss or physical injury to a third party. Common examples include being involved in a car accident while driving or accidentally knocking over an expensive vase while performing an installation at a customer’s home.
When such incidents occur, the affected third parties may send a legal demand letter to the insured, requesting compensation for the loss.
Upon receiving a notice of claim for a liability incident, the insurance company’s claims department will assess whether the type and cause of the loss or damage suffered by the third party are covered under the policy.
If the insurance company determines that the loss is insurable, the claims department will manage the legal defense and investigation, negotiate a settlement, and, if the insured is found legally responsible, will pay any compensatory damages the insured is obligated to pay to the third party.
Insuranceopedia Explains Liability Claim
If the insured makes a mistake or is alleged to have made one that causes financial loss, physical injury, or even death to a third party, they may receive a legal notice demanding compensation for the loss or injury. If the insured has liability insurance coverage, they can file a liability claim with the insurer to seek assistance.
For example, the insured may file a liability claim if they are involved in a car accident that causes bodily injury or property damage to another person, or if they are negligent in their job, resulting in harm to a client or causing a product to have unintended consequences for a customer.
When a notice of claim is received by an insurance company, it is first directed to the claims department, which will conduct an initial evaluation to determine if the type of damage and the alleged cause of loss are covered under the policy.
If the claim is covered, the insurance company will involve its legal team to take over the investigation and defense of the case. In most liability insurance policies, the insurer has both the right and the duty to defend against liability claims.
The insurer also has the right to settle with the claimant if they believe the chances of winning are low or if going to court would be too costly. If the insured holds adequate liability insurance, the insurer will assist in various ways, including paying settlements, compensating the aggrieved third party for loss or damage, and providing legal assistance in the event of litigation.
