Liability insurance covers a wide range of insurance types that cover legal claims against the insured. Various types of insurance include an aspect of liability coverage.
For example, a homeowner’s policy normally includes liability coverage which protects them in the event of a claim brought by someone who slips and falls on their property; auto insurance also includes an aspect of liability insurance that indemnifies against the harm or damage that a crashing car can cause to others’ lives, health, or property.
The protection offered by a liability insurance policy has two parts: legal defense coverage in the event of a lawsuit filed against the policyholder and indemnification with respect to a court verdict or out-of-court settlement.
Liability insurance policies usually cover only the negligence of the policyholder, not the results of willful or intentional actions by the insured party.
A commercial liability insurance program usually consists of multiple layers. The first layer of this insurance typically consists of primary insurance, which provides a first dollar indemnity for judgments and settlements up to the fixed limits of the primary policies.
Generally, primary insurance is subject to a deductible, and the insurance company is obligated to defend the insured against lawsuits, which normally start with assigning legal counsel to defend the insured.
In some situations, a commercial insured may choose to self-insure. Above the primary insurance or self-insured retention, the insured party may have one or more layers of excess insurance coverage to cover the additional limits of indemnity protection.
There is a multitude of types of excess insurance, including “standalone” excess policies, “follow form” excess insurance, and “umbrella” insurance policies.
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