Liabitity Insurance

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Liability Insurance is a component of the General Insurance System to protect the Insured against the risk of liabilities imposed by lawsuits and Similar claims imposed by the third parties. The person who bought the Liability Insurance policy will be protected whenever any suit is filed against the insured by a third party for the amount which is within the Coverage of  the policy.

The liability Insurance is the Third Party Insurance contract and the payment is not made to the Insured but instead to the third party which filed a suit against the insured. The Insurance Company defends the client in case a suit is filed against the Insured. Unless the policy expressly provides that legal cost of defence will affect the policy limit the policy limits wont be affected.

The Liability Insurance Providers has three basic Duties which are as follows :

• Duty to Defend
• Duty to Indemnify
• Duty to settle a pretty clear claim

Originally the Liability Insurance policy used to mature on Occurrence basis which means that the Insurance Company agreed to defend, the person who bought the policy, against any loss which occur ed allegedly by any act or omission of the policy holder.

Because of the large number of the toxic Scandals which led to the numerous judgements of the courts which resulted in the Increased Potential Liability chasing Occurrence policies and due to this the first thing the Insurance Companies did was to drastically Increase the premiums on these Liability Insurance Policies. The 2nd measure taken by the Insurance Providers was to issue only claims made policies which insures only those claims which are made against the Insurance Policy holder during the time of the Policy.