Liability insurance is a part of the general insurance system of risk transference. Liability insurance was created because the general risk faced by an individual or companies created a group and created a self-help fund so the members could ultimately be compensated if the risk became reality.
Liability insurance is intended as security for the specific claims against third party claim. Payment is not typically made to the insured, but rather to the one suffering loss that is not a party to the insurance contract. These policies do not include the rule regarding the responsibility for damage caused intentionally and contractual liability. In many countries, liability insurance is a compulsory form of insurance for those at risk of being sued by third parties for negligence. The most common classes of mandatory policy cover the drivers of vehicles, they also include :
- Those who offer professional services to the public.
- Those who manufacture products that may be harmful.
- Those who offer employment.
Reasons for the Laws
- The classes of insured are deliberately engaging in activities that put others at risk of injury or loss.
- Public policy requires that such individuals carry insurance so that, if their activities do cause loss or damage to another, money will be available for compensation.
- There are further ranges of perils that prudent people insure against and, consequently, the number and range of liability policies has increased in line with the rise of contingency fee litigation offered by lawyers (sometimes on a class action basis).
Structure Manipulation
The carrying of mandatory auto insurance is found in many countries, especially the UK. Where the carrying of a policy is not mandatory and a third party makes a claim for injuries suffered, evidence that a party has liability insurance is generally inadmissible in a lawsuit on public policy grounds, because the courts do not want to discourage parties from carrying such insurance. There are two exceptions to this rule :
- If the owner of the insurance policy disputes ownership or control of the property, evidence of liability insurance can be introduced to show that it is likely that the owner of the policy probably does own or control the property.
- If a witness has an interest in the policy that gives the witness a motive or bias with respect to specific testimony, the existence of the policy can be introduced to show this motive or bias. Federal rules of civil procedure rule 26 was amended in 1993 to require that any insurance.
- Policy that may pay or may reimburse be made available for photocopying by the opposing litigants, although the policies are not normally information given to the jury. Federal Rules of Appellate Procedure rule 46 says that an appeal can be dismissed or affirmed if counsel does not update their notice of appearance to acknowledge insurance.
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