Liability Insurance Basics
Negligence is the foundation
Liability insurance responds to legal liability for damages because of bodily injury or property damage to third parties. Negligence requires duty, breach, proximate cause, and damages. Defenses include comparative fault (Missouri applies a pure comparative fault approach in tort), assumption of risk, and intervening cause. Intentional torts and most contractual liability are excluded unless assumed in an insured contract.
Damages and limits
Compensatory damages are special (medical bills, lost wages) or general (pain and suffering); punitive damages are often excluded or restricted. Limits take several shapes: per person, per occurrence, general aggregate, products-completed operations aggregate, and a separate personal and advertising injury limit.
Defense obligations
Under the occurrence-based CGL, the duty to defend is broader than the duty to indemnify, and defense costs are paid outside the limit as supplementary payments. Umbrella and excess forms pay defense costs inside their limits. This asymmetry is a classic exam trap.
Occurrence versus claims-made
Occurrence policies respond to injury that happens during the policy period, whenever the claim is filed. Claims-made policies respond to claims first made during the policy period and rely on a retroactive date to define prior exposure. An extended reporting period (tail) preserves coverage after expiration.
Risk transfer tools
Additional insured endorsements, certificates of insurance, waivers of subrogation, and contractual indemnity shift risk. A certificate is evidence of coverage, not a contract, and does not amend the policy.
Rule of thumb
Follow the claim: when did the injury occur, when was the claim made, and is defense inside or outside the limit? Those three answers resolve most liability questions.
Worked example
A $1,000,000 per-occurrence limit with defense outside the limit pays a $400,000 judgment plus $150,000 in defense costs and still has $600,000 of limit available.