Liability insurance is intended to compensate for any damage caused to the third party by the insured. The essence of liability insurance is that the insurer undertakes to compensate for the damage caused to insured third parties. The object of liability insurance is civil liability. Liability insurance is carried out on the basis of an agreement between the insured and the insurer.
Liability insurance can be: voluntary and mandatory .
Voluntary liability insurance is the free expression of the will of the insurer and the insured, extending to it all the general rules on contractual obligations and transactions. Compulsory liability insurance is an imperative prescription of the law, as a special case of a statutory coercion to enter into a contract, while providing for the consequences of violating the rules on compulsory insurance. The importance of compulsory liability insurance is explained by the fact that in carrying out certain types of activities a person may cause significant harm to the society or an indefinite number of persons. The amount of harm will be large enough, while the person may not have enough or no means to compensate for the harm. In the civil code there is no list of categories of persons entrusted with the obligation to conclude an insurance contract for its liability. However, it is indicated that this type of insurance is carried out in cases provided by law. Currently, such a legal act is the Law “On Compulsory Insurance of Civil Liability of Vehicle Owners”, which entered into force on July 1, 2003, which distinguishes vehicle owners as a category of persons obliged to insure their civil liability.
There are non-contractual (tort) and contractual civil liability.
Non-contractual liability is determined by Art. 931 of the Civil Code of the Russian Federation, where it is stated: “Under an insurance contract for the risk of liability for obligations arising as a result of causing harm to the life, health or property of other persons, the risk of liability of the policyholder or other person who can be charged with such liability” can be insured.
This responsibility comes in the event of harm to third parties not related to contractual obligations. Contractual liability arises as a result of non-fulfillment or improper performance of contractual obligations and is governed by Article 932 of the Civil Code of the Russian Federation, which states: “Insurance of the risk of liability for breach of contract is permitted in cases provided by law.”
The victim in this type of insurance is the third person with whom there was no contractual relationship at all before the onset of damage (for example, a cyclist hits a playing child on the street, a roofer jumps out of a brick that falls on a passing man).
The victim is also a partner in a contractual relationship who entered into a contractual relationship with the losser and suffered a loss within them (for example, a rapidly falling roofing brick falls on the homeowner’s balcony and breaks a vase with flowers). In addition to the direct victim, there are also indirect victims, i.e. persons whose damage was caused not directly, but through damage to a third party (for example, in an accident, an opera singer was postponed, a theatrical performance was canceled; the indirect victims were the spectators). As a rule, indirect victims are not eligible to make claims.
The exception is, for example, in German law, the claim of children to receive alimony in the event of the death of their parents. Liability insurance is damage insurance, and it aims to protect the policyholder from possible loss . For the insurer as a legal entity, liability insurance can be designated as insurance against increasing liabilities. If fire insurance serves to preserve the assets of a company, then liability insurance serves against an increase in liabilities in the case of claims by third parties.
Liability insurance for the insured means:
1) protection from virtually all claims of liability;
2) the ability to pass on to the insurer the risk of liability that, due to insurance premiums, becomes calculated;
3) shifting the costs of litigation to an insurance company, since a person without special legal knowledge cannot independently fight against claims for compensation for damage;
4) the ability to have the insurer as a third party in the event of a dispute between the policyholder and the victim. The relationship between the policyholder and the insurer can be described as a cover relationship. The policyholder is responsible in unlimited size, and coverage is offered only within the insured amount. The insurer may also, within the framework of liability insurance, pay for expenses not related to direct claims on the liability of the victim (for example, the cost of rescue expenses, the cost of legal costs for protection against unfounded claims). Liability insurance is intended to compensate for any damage caused to the third party by the insured. To sue for civil liability, it is necessary to have damage, as well as guilt and unlawful action (inaction) of the offender, the existence of a connection between them. Damage can be physical, moral, financial, material. Physical damage includes death, physical disability, physical and mental temporary disability, care costs, moral damage. Material damage is considered to be full damage or partial destruction, damage, illegal use of property or things. Financial damage is the deprivation of future income, possible profit, the right to use something. Moral harm may be in violation of business reputation, copyright, disclosure of privacy secrets, medical secrecy, the temporary restriction of any rights. In most typical cases today there is no need to prove guilt if it is obvious. However, on controversial issues, the need to prove guilt to the victims remains in force. The victim must independently prove that it was as a result of the action or inaction of a person that he suffered damage. When settling an insured event in liability insurance, an important feature is the relationship between the insured, the insurer and the victim. The victim declares his rights to compensation for damage, suing the insured. The insurer, in turn, sues his insurance company, demanding payment of insurance compensation in the appropriate amount. There is no direct legal relationship between the insurer and the victim. But the insurer, on the basis of the insurance contract with the person who caused the damage, must either reject or satisfy the claim. The insurer has the authority to enter into negotiations with the victim for his client and give all necessary explanations on his behalf. If, in the opinion of the insured and his insurer, the claim is unreasonable, the insurer must conduct a lawsuit on behalf of the insured and at its own expense. But at the same time in the insurance contract may also provide for their own participation. In the “Licensing conditions of the insurance activity of the Russian Federation” the following sub-sectors of liability insurance are defined:
- Motor vehicle liability insurance. (CTP)
- Liability insurance carrier.
- Civil liability insurance of high-risk source enterprises.
- Professional liability insurance.
- Ecological insurance.
- Product liability insurance.
- Shipowners liability insurance.
- Liability insurance for default
- Insurance of other types of civil liability.
In developed countries, there are their own classifications of types of liability insurance. Each country has certain features, but, as a rule, they all include the following types: private liability insurance, motor third party liability insurance, product liability insurance, professional liability insurance, etc.