Running a company entails dealing with all kinds of risks. Business owners and managers are constantly exposed to unexpected perils like workplace accidents, equipment breakdown, robberies, etc. And on top of that, there’s always the risk of third-party harm.
Third party harm refers to any injury, disease, death or property damage caused to a member of the public, i.e., a third party / person not directly associated with the business. Here, the insured business is the ‘first party’, the insurance company is the ‘second party’ and the person(s) making the claim is the ‘third party’. When such harm is caused on the business premises or due to business activities, the company becomes legally liable to offer remedy or damages / compensation to the third party.
This liability is covered by adding Third Party Liability coverage to the insurance policy associated with the risk. For example, adding a Third Party Liability cover to a Machinery Breakdown Insurance policy as an extension will provide coverage to any bodily harm, death, or property damage caused to a third party due to the breakdown of a machinery or equipment. Through such a cover, the business’s legal liability is indemnified and due compensation to the claimants can be easily provided.
Third Party Liability Insurance can be added to other insurance policies like Vehicle Insurance, Contractor's Plant and Machinery Insurance, Office Package Insurance, Hull and Machinery Insurance, and many more.
Third Party Liability Insurance, when bought as an individual policy is also known as Public Liability Insurance.
Third Party Liability coverage indemnifies the business’s liability for any third party claims arising out of the following :
- Bodily injury - this includes costs like hospital care, lost wages, medicines, etc, for injuries suffered by the claimant
- Death or disablement
- Damage or loss to property
This type of a cover comes with certain general exclusions, such as :
- Any kind of a contractual liability
- War, invasion, civil commotion, and related perils
- Radioactivity, hazardous substances, and other nuclear perils
- Intentional or willful misconduct
- Professional negligence
- Civil fines, tax evasion liabilities & penalties of other kinds
Different insurance policies come with their own sets of specific exclusions to their Third Party Liability coverage.
Third Party Liability coverage is most commonly found in Motor Insurance policies. In India, it is mandatory for any vehicle operating on the road to carry Third Party Liability Coverage. Additionally, any movable plant and machinery operating on construction sites and civil engineering projects needs to be insured under a Third Party Liability cover as per law.
Interested in learning more? Read about individual Third Party Liability Insurance also known as Public Liability Insurance policy