Also known as: third party liability insurance · third-party liability · third party liability · liability insurance · third-party insurance
Written by attorneys — see sources 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.
Mr. and Mrs. Comunale were struck in a marked pedestrian crosswalk by a truck driven by Percy Sloan. Mr. Comunale was seriously injured, and his wife suffered minor injuries. Sloan was insured by defendant Traders and General Insurance Company under a policy that contained limits of liability in the sum of $10,000 for each person injured and $20,000 for each accident. Sloan notified Traders of the accident and was told that the policy did not provide coverage because he was driving a truck that did not belong to him. When the Comunales filed suit against Sloan, Traders refused to defend the action, and Sloan employed competent counsel to represent him. On the second day of the trial Sloan informed Traders that the Comunales would compromise the case for $4,000, that he did not have enough money to effect the settlement, and that it was highly probable the jury would return a verdict in excess of the policy limits. Traders refused, and the trial proceeded to judgment in favor of Mr. Comunale for $25,000 and Mrs. Comunale for $1,250. Sloan did not pay the judgment, and the Comunales sued Traders under a provision in the policy that permitted an injured party to maintain an action after obtaining judgment against the insured. In that suit judgment was rendered in favor of Mr. Comunale for $10,000 and in favor of Mrs. Comunale for $1,250. This judgment was satisfied by Traders after it was affirmed in Comunale v. Traders & General Ins. Co., 116 Cal.App.2d 198 [253 P.2d 495]. Comunale obtained an assignment of all of Sloan's rights against Traders and then commenced the present action to recover from Traders the portion of his judgment against Sloan which was in excess of the policy limits. The jury returned a verdict in Comunale's favor, but the trial court entered a judgment for Traders notwithstanding the verdict.
View caseEvidence 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.
Supporting sources
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.
Supporting sources
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.
Supporting sources
…subdivision 1, provides in part that the two years' period of limitation applies to an action "upon a contract, obligation or liability not founded upon an instrument of writing, ..." : Code of Civil Procedure, section 337, subdivision 1, provides in part that the four years' period of limitation applies to an…