Casualty Insurance Basics
Liability fundamentals
Liability insurance pays sums an insured is legally obligated to pay as damages because of bodily injury or property damage to others. Negligence requires duty owed, breach of that duty, proximate cause, and actual damages. Defenses include contributory negligence (bars recovery in a few jurisdictions), comparative negligence (reduces recovery proportionally, or bars it above a 50% or 51% threshold in modified states), assumption of risk, and intervening cause. Res ipsa loquitur shifts the burden to the defendant when the instrumentality was in the defendant's exclusive control.
Types of liability
Compensatory damages are special (medical bills, lost wages - measurable) or general (pain and suffering). Punitive damages punish conduct and are often excluded or restricted. Absolute or strict liability applies without fault, as with wild animals or abnormally dangerous activities. Vicarious liability makes one party responsible for another's acts, typically employer for employee.
Policy structure
Coverage A covers bodily injury and property damage; Coverage B covers personal and advertising injury (libel, slander, false arrest, invasion of privacy); Coverage C pays medical expenses regardless of fault. An occurrence form covers injury that occurs during the policy period; a claims-made form covers claims first made during the period, subject to a retroactive date, with an optional extended reporting period. Limits include each occurrence, general aggregate, and products-completed operations aggregate. Supplementary payments (defense costs, bonds, lost earnings) are paid in addition to limits.
Worked example
A $10,000 judgment under a 60/40 comparative negligence finding yields $6,000. Rule of thumb: liability coverage is triggered by injury to a third party - injury to the insured or the insured's own property is first-party coverage.