Casualty (Liability) Insurance Basics and Policy Provisions
What liability insurance does
Liability insurance pays third parties - it defends and indemnifies the insured for sums the insured becomes legally obligated to pay because of bodily injury, property damage, or personal and advertising injury arising from an occurrence (an accident, including continuous or repeated exposure to substantially the same general harmful conditions). It is not first-party coverage; the insured's own injuries and property are excluded.
Negligence and defenses
Negligence requires a duty, a breach, proximate cause, and damages. Defenses include assumption of risk, intervening cause, and comparative fault. Florida's negligence rules shifted in 2023 toward a modified comparative system that bars recovery when the plaintiff is more than 50% at fault and limits joint and several liability.
Key provisions
- Limits: split limits (e.g., 100/300/50 = per-person BI / per-occurrence BI / property damage) or a combined single limit; a general aggregate caps total annual payouts, and a products-completed operations aggregate is tracked separately.
- Occurrence vs. claims-made: claims-made forms respond to claims first made during the policy period and require retroactive dates and extended reporting (tail) endorsements.
- Duty to defend is broader than the duty to indemnify and generally ends when limits are exhausted; supplementary payments (defense costs, bonds, loss-of-earnings) sit outside the limit on most forms.
- Medical payments pays small third-party medical bills regardless of fault, without a liability determination.
Worked example / rule of thumb
If a policy has 100/300/50 limits and two claimants each win $150,000 for bodily injury, each collects $100,000 (per-person cap) and the second claimant cannot reach the per-occurrence cap - total BI paid is $200,000, not $300,000.
Rule of thumb: Defense costs outside the limit and no fault required = medical payments; fault required and limits consumed = liability.