Also known as: third party liability insurance · third-party liability · third party liability · liability insurance · third-party insurance
Written by attorneys · grounded in primary & secondary sources — see below
A contract of insurance purchased by a policyholder to protect against potential liability to third parties. Coverage is triggered by the policyholder's liability for damage to another person or their property rather than by loss to the policyholder's own property.
Theodore Tucker, injured in a car accident, sues Threshold Capital's liability insurer directly without joining the insured driver. The insurer is incorporated in Delaware with its principal place of business in New York. Because the action is a direct action against the insurer to which the insured is not joined, the court deems the insurer a citizen of the state where the insured is a citizen for purposes of determining diversity jurisdiction.
Trevor Tate is sued for causing a serious collision. His third-party liability insurer refuses a reasonable settlement offer within policy limits and declines to defend. After a verdict exceeds the limits, the insurer must cover the excess amount because its wrongful refusal exposed the insured to personal liability beyond the policy.
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Evidence of liability insurance is inadmissible to prove negligence or wrongful conduct. It may be admitted when offered for another purpose such as proving bias, agency, ownership, or control.
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Each party must disclose without request any insurance agreement under which an insurer may be liable to satisfy all or part of a possible judgment or to indemnify or reimburse for payments made on the judgment.
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No. A partnership may purchase and maintain insurance to protect partners against liability asserted in their official capacity even if the agreement could not eliminate or limit that liability.
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…or which, in the ordinary course of things, would be likely to result from it. (For cases holding Civ. Code § 3300 applicable to liability insurance contracts, see Henkel v. Pacific Employers Ins. Co. , 140 Cal.App.2d 301, 305-306 [295 P.2d 80]; Venturi v. Zurich General Acc. & Liab. Co. , 14 Cal.App.2d 89 [57 P.2d 1002].) It is…