Third party liability, legal expense and business insurance policies

Liability for damages and general liability insurance

General liability insurance is taken out in view of the obligation to pay damages. The insurance thus compensates for expenses in cases where the insured person is the party liable for damages.

The premise in compensations for damages is that every person suffers the damages encountered. The person causing the damage may be liable for it in cases where the legislation or legal practice provides grounds for this.

For the liability for dagames to emerge, it is normally required that the damage has been caused with negligence, meaning and the person causing the damage has acted in a way that is somehow reprehensible or has caused the damage by carelessness or negligence.

A private person’s liability for damages may be more extensive than the scope of coverage of the general liability insurance. Even if the costs were not to be covered by the general liability insurance, the party causing the damage may still be liable for them.

Expenses covered by general liability insurance

The general liability insurance covers expenses incurred for both personal and material damages. Personal damages may result in treatment expenses, permanent handicap or loss of income for the party suffering the damage. Material damages, in turn, are damages to some form of immobile or mobile property.

The compensations payable from the general liability insurance are determined on the basis of the Tort Liability Act (Damages Act). The expenses incurred by the damaged party will be compensated in line with the so-called full indemnification principle. The purpose of the compensation is to restore the damaged party’s financial situation to the level in which they would be without the damage.

Claiming compensation from general liability insurance

The damaged party must generally first seek damages directly from the liable party. The person or party responsible for the damages then makes a notification of claim, addressing it to their own liability insurance company. The insurance company assesses the compensability of the damages on the basis of the general principles of tort law and the policy terms of the general liability insurance in question.

The general liability insurance contract contains an agreement of excess, and damages with a value lower than that will not be compensated. The excess is a sum payable by the person responsible for the damage, in other words, the insurance company pays the damaged party’s compensation minus the excess sum.  The damaged party must claim the insurance excess sum directly from the party causing the damage. The excess sum depends on the agreement between the policyholder and the insurance company. In private persons’ general liability insurance policies, the excess is normally about 200 euro.

General liability insurance policies also determine a maximum compensation payable by the insurance company. For private persons, the general liability insurance may have, for example, a 100 000 to 200 000 euro upper limit of compensations.

The excess and the maximum compensation payable for one damage (sum insured) are quoted in the insurance policy.

Most common exclusions in general liability insurance

Normally, the general liability insurance does not cover intentionally caused damages. The exception are the intentional damages caused by children under 12 years of age. The general liability insurance neither covers damages caused purely by accidents.

The general liability insurance comes with various exclusions. The damages mentioned in the exclusions will not be covered by the insurance in question.

Normally, the general liability insurance does not cover damages caused to property held by the insured or in their possession, borrowed by them or otherwise handled by taken care by them. Moreover, the general liability insurance does not cover damages where the compensability is based solely on an agreement or undertaking. Normally, the damages caused by traffic accident are also excluded from the liability as well as those caused by physical assault or fight. These policies also include other exceptions.