In law, liable means "responsible or answerable in law; legally obligated. Legal liability concerns both civil law and criminal law and can arise from various areas of law, such as contracts, torts, taxes, or fines given by government agencies. The claimant is the one who seeks to establish, or prove, liability.
Liability Insurance provides coverage to the insured party against legal claims resulting from bodily injuries and property damage to third party. Liability Insurance covers defense costs and any payouts for which the insured party would be found legally responsible. Intentional or willful damages and contractual liabilities are out of scope of cover in liability insurance.
Liability insurance is critical for those who may be held liable for injuries to others, or in the event that the insured party damages someone else's property and is considered to be at fault. Liability insurance policies are taken out by anyone who owns a business, drives a car, practices medicine or law—basically anyone who can be sued for damages and/or injuries.
Good liability risk management can reduce the chances that your business will be sued, but it can never eliminate the risk entirely. You or a member of your organization can make a mistake that injures someone or damages property. Your mistake could harm the reputation or interfere with the privacy of a customer, client, competitor or member of the general public. When such injuries occur, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.
Depending on the degree of harm and the number of people injured and/or value of property damaged, a lawsuit could bankrupt your business. Even if your organization is ultimately cleared of any wrongdoing, a determined plaintiff can keep you tied up in legal proceedings for a long time, entailing significant cost to defend yourself. Liability insurance pays the cost of your defense and protects your assets.
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