Liability
Definition
Legal responsibility for damages or injuries caused to others. Liability insurance protects the insured from financial loss due to legal claims and judgments.
Example
A business owner is found legally liable for a customer's injury that occurred on their premises. The business's general liability policy pays for the medical expenses, legal defense costs, and any settlement or judgment, up to the policy limits.
In Practice
Liability can arise from negligence, strict liability, or contractual obligations. Liability insurance is essential for businesses and individuals with exposure to claims. Policies typically cover both damages and defense costs. Limits should be adequate for potential worst-case scenarios.