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: a 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 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 starts 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.