What is Liability Insurance Law?

N. Madison

Liability insurance law is a category of law related to a party's liability in the event of accidents and injuries. This type of law governs who is considered responsible for accidents and cases of negligence as well as the securing of liability insurance and payment of claims. It also covers lawsuits filed in cases in which a person or business has liability insurance. Though liability insurance law typically covers the same sorts of cases and situations, laws differ from country to country and even from region to region.

Liability law encompasses a party's culpability an accident or injury.
Liability law encompasses a party's culpability an accident or injury.

Liability insurance law governs the liability coverage a person or business may obtain. This type of insurance covers a person in the event he is deemed responsible for an accident, injury, or property damage. The coverage typically pays for claims that are settled out of court as well as those that are handled in court. This category of law also governs how cases are decided in the event that both parties have liability insurance but it is difficult to determine who is at fault.

While liability insurance protects an insured person’s assets from loss in the event of a lawsuit, it basically benefits a third party involved in an injury or property-damage case. The third party files a claim with the insured’s insurance company, and if the insured is determined to be at fault, the insurance company then pays the claim. There are some exceptions to this general rule, however. In some cases, the insurance company may not pay if the injury or damaged was caused by an event, practice, or situation the insurance policy didn't cover. For example, if a business has liability insurance for one type of business activity, it may not be covered for damage caused by a second and uninsured business.

In some jurisdictions, liability insurance law makes it mandatory for individuals to carry liability insurance in certain situations. The most common of these is automobile ownership. Many jurisdictions require anyone who owns a car to maintain auto insurance for it. If a person drives his car without insurance or drives another uninsured vehicle, he could face such consequences as a suspended license and monetary fines.

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Liability insurance law also includes laws that dictate the type of claims a person can file in a liability case. It also covers laws that limit insurance claims based on the type of insurance a person has purchased. Additionally, liability insurance law includes laws that limit the amount of money a person can seek through an insurance claim or during a lawsuit.

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