Third Party Liability Coverage
What it pays
Third party liability (Coverage A) pays sums the insured is legally liable to pay for bodily injury or property damage to others arising from ownership, use or operation of an automobile. It also covers defence costs, which are paid in addition to the limit in most provinces. Minimum limits are set by statute (commonly $200,000), but higher limits are strongly recommended.
Who is an insured
Insureds typically include the named insured, the spouse, anyone driving with consent, and persons legally responsible for the named insured's use of the vehicle. Employers may be covered for vicarious liability. The key concept is consent - express or implied - and the distinction between a first permittee and a second permittee.
Exclusions to know
Intentional acts, use in a race or speed test, carrying passengers for compensation (unless a public passenger vehicle), and use outside the stated territory are common exclusions. Note that the insurer still has a duty to defend until liability is determined.
Traps in questions
(1) Assuming defence costs erode the limit - they usually do not. (2) Forgetting that liability follows the vehicle as well as the driver. (3) Missing that a breach by one insured may not bar coverage for an innocent co-insured. (4) Confusing the limit per accident with a per-person limit.
Worked example
Insured with a $1,000,000 limit causes $1,300,000 in damages. The insurer pays $1,000,000 plus defence costs; the insured is personally exposed to the $300,000 excess. This illustrates why adequate limits matter.