Casualty Insurance Basics and Liability Concepts
What liability insurance does
Liability coverage pays on behalf of an insured who is legally obligated to pay damages because of bodily injury or property damage to someone else. It does not pay the insured's own injuries (that is first-party medical payments or workers compensation) and generally does not pay punitive damages or intentional acts.
Negligence
Four elements: duty, breach, proximate cause, and damages. Duty depends on the visitor's status: a trespasser is owed only avoidance of willful injury; a licensee (social guest) must be warned of known hidden dangers; an invitee (customer) is owed reasonable inspection and repair.
Defenses
Contributory negligence bars recovery entirely under the old rule; comparative negligence reduces the award by the claimant's percentage; assumption of risk and last clear chance are additional defenses. Strict (absolute) liability applies without fault to hazardous activities and animals, and workers compensation is a statutory no-fault system.
Vicarious liability
One party is held responsible for another's acts, typically an employer for an employee acting within the scope of employment.
Limits and structure
Limits appear as per occurrence and aggregate, or as a combined single limit. Defense costs and supplementary payments are paid in addition to the limit in CGL and auto policies, so total payout can exceed the stated limit. Medical payments is no-fault and first party. Occurrence policies respond to injury during the policy period; claims-made policies respond when the claim is made, subject to a retroactive date.
Trap: if the claimant's negligence reduces the award, it is comparative; if it bars the suit, it is contributory.