Liability insurance is a part of the general insurance system of risk financing to protect the purchaser (the “insured’) from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that laced a common peril formed a group and created a self- help fund. Out of which compensation is paid to any member who incur loss. The modern insurance system is profit oriented. They offer protection against specified perils in consideration of a premium.
Liability insurance is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability is not covered under liability insurance policies. Under liability insurance policy the insurer promises to indemnify the loss caused to a third party, resulting in death or injury or fatal accident with third party or loss of third party’s property due to the negligent act of employer, hiss employees’ or insured’s property. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to rise when cases go to trial. Fidelity insurance, automobile insurance, machine insurance etc. falls under this category.
Product liability Policy
The structure of the policy is more or less than public liability policy. The indemnity applies to claims arising out of accidents during the period of insurance and first made in writing against the insured during the policy period arising out of any defects in the products specified.
This policy is designed for owners of passer lifts in building to cover third party liabilities for personal injuries or property damage arising out of the use of operation of lifts.
Employer’s Liability Policy or workman compensation insurance
This policy protects the employers against their legal liability for payment of compensation arising as a result of death or disablement of the employees arising out of and in the course of employment.
Directors and Officers Liability Policy
This is a highly specialized type of insurance newly introduced in India. This policy is designed to provide protection to Directors and Officers against their personal civil liability.