Liability Insurance Definition

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    Liability Exposures

    • A home or business can be a source of liability exposures. If someone is injured at your residence or place of business, you can be held responsible. Another exposure comes from services provided. A tree trimming service that damages a client's property may be facing a lawsuit.

    Direct or Vicarious

    • Liability is either direct or vicarious. Direct liability is injury resulting from your own conduct; vicarious liability is liability for which you are indirectly responsible. A contractor who hires a subcontractor may be held responsible if the subcontractor causes damage to a client's property.

    Types of Legal Liability

    • Legal liability can be divided into acts of negligence, intentional acts, strict liability and absolute liability. Strict liability applies to products and any damages they may cause to a consumer's health or safety; absolute liability means that the manufacturer is responsible for any damages regardless of fault. An example of absolute liability would be manufacturers of explosive materials.

    Compensatory Damages

    • Compensatory damages are covered under a legal liability policy. Special damage awards include money paid for costs of medical bills, lost income, rehabilitation, and replacement or repair of property. General damage awards are for intangible losses such as pain and suffering.

    Punitive Damages

    • A legal liability policy will also pay for punitive damages. Punitive damages are sums of money paid in order to punish the wrongdoer for his conduct. Laws may be in place limiting amounts that can be recovered.

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