Liability Insurance, type of insurance used to cover the risk of incurring legal liability to pay money damages. Such insurance guarantees financial protection to an insured party who might be required to pay damages resulting from negligence. The negligent act may be one that causes personal injury, death, or property damage. Liability for negligence may result not only from the conduct of the insured but also from the conduct of his or her agents and employees. Acts of negligence resulting in liability occur in connection with a wide variety of private and commercial activities, such as the operation of a motor vehicle, the conduct of a business, and the ownership or occupancy of the property. Liability insurance sometimes is called third-party insurance, because the insurance company protects the insured against suit by a third party, that is, the claimant.
A policy of liability insurance generally provides for investigation, negotiations for private settlement of claims, the defense of suits brought against the insured, and the payment of judgments or judicially approved settlements up to the limits specified in the policy. Ordinarily, the assistance and cooperation of the insured are required in the defence against the claim.
Since legal liability may arise in many situations, liability policies usually do not assume all the risks of liability.
Accident Insurance covers the insured party against accidents, usually caused by himself or herself. It is compulsory in most countries, including the United Kingdom, Australia, and New Zealand, for employers and drivers of motor cars to have insurance to cover any damage to others for which they may be responsible. However, the major insurers in the United Kingdom have set up the Motor Insurers’ Bureau, which provides cover if the negligent driver is uninsured or cannot be identified. These provisions have made courts more willing to find that injuries to a person in an accident were caused by negligence so that the person receives compensation. Under the Road Traffic (NHS Charges) Act of 1999, where compensation has been paid out, the treatment costs incurred by a hospital in treating a traffic accident victim can be reclaimed from the compensator.
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