The concept and types of liability insurance

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

For the majority of citizens and business leaders, it has become customary to draw up life, car, and property insurance contracts. Faced with such a category as "liability insurance", many do not understand the need for this type of protection. Although, as practice shows, in the modern world, existing types of liability insurance allow you to protect yourself from possible unforeseen expenses when carrying out various activities and even driving a car. Based on the norms of civil law, they distinguish liability under the contract and under the law.

Responsibility under the law

Extra-contractual, or tort, or liability under the law appears when damage is caused to a person who is not in a contractual relationship with the originator of the event. This type of liability occurs regardless of the existence of signed contractuallegal relations.

Insurance of such risks involves certain conditions:

• the liability of the insured himself or another participant who may also be the responsible person is insured;
• all participants who may cause harm by their actions must be indicated in the insurance document;
• the beneficiary can be both the policyholder and the insured participants, as well as third parties, if it is specified in the insurance contract;
• The injured person has the right to claim the amount of compensation for damages directly from the insurance company, if such conditions are specified in the insurance contract concluded between the parties.

Contractual liability

Responsibility under the contract occurs in case of non-fulfillment, poor-quality performance of duties that are spelled out in the concluded agreement between the parties. This type of liability insurance also requires certain conditions:

• responsibility is provided for by current legislative documents;
• only the liability of the policyholder is insured, all other contracts are considered void;
• the beneficiary under the insurance contract indicates the party with which the policyholder has entered into a contractual relationship.

Given the legal relationship that arises between the insurance organization and its customers, the insurer assumes the obligation to compensate for property damage or damage to he alth to third partiespersons.

Responsibilities

According to the requirements of the insurance legislation, the object of liability insurance is determined by property interests directly related to the insured and the persons affected as a result of his activities. Legal regulations clearly delineate which types of insurance are covered by liability insurance.

There is a classification of types of responsibility for this:

• administrative - occurs when an administrative offense or violation is committed;
• material - obliges the employee to compensate for the loss caused to the organization as a result of non-compliance or violation of applicable laws;
• civil law - appears when civil legal norms of legislative acts are violated and entails non-observance of the subjective rights of third parties;
• professional - represents the interests of specialized specialists for possible material damage in the performance of their duties or the provision of a list of services specified in the contract.

The main types of liability insurance, such as civil and professional, are of interest to the financial market.

Public Liability Insurance

A manufacturing enterprise, like an ordinary citizen, during the performance of assigned production tasks or in everyday life, by its actions, can damage the property of unauthorized persons or harm their he alth. By law, perpetrators mustcompensate for the damages caused. In order to minimize such costs, insurance companies have approved types of civil liability insurance contracts.

When signing an insurance policy, it should be borne in mind that civil law obligations are of an exclusively property nature. Existing types of civil liability insurance offer to shift possible losses to the insurer. At the same time, it must be understood that the existence of such an agreement does not relieve the policyholder of possible administrative or criminal prosecution.

Based on the norms of insurance legislation, the following types of civil liability insurance are distinguished:

• vehicle owners;
• cargo carrier;
• owners of industrial companies, organizations that, as a result of their activities, are classified as objects of increased danger;
• owners or tenants of waterworks.

Professional liability insurance

Some types of professions are classified as unsafe activities, as the worker can harm the client by his actions. It is possible to cause property losses during poor-quality provision of services or performance of work, unfair performance of professional duties. Material losses that will be inflicted to customers can be reimbursed by the insurance company if the culprit has a policy.

Existing types of insuranceprofessional liability are tied to the occupation of the future client of the insurance company. Professions such as a notary, a private doctor, a customs broker, an appraiser, an auditor are required to have an insurance document among the permits, thanks to which the responsibility for future errors and shortcomings will be shifted to the insurer.

Responsibility of car owners

Among the existing types of civil liability insurance, the most demanded is the compulsory motor insurance. This agreement en titles the driver to drive the vehicle. Insurance companies offer both voluntary and compulsory types of liability insurance. On a voluntary basis, the client of the insurance company may increase the amount of the insurer's liability in the event of a road traffic event.

With the entry into force of the system of "direct loss settlement" in the presence of an OSAGO agreement, not only the culprit of the company, but also the injured client has the right to receive insurance compensation from his insurance company.

The accrual of insurance payment is carried out if the owner of the insurance document became the culprit of the accident. This type of compulsory civil liability insurance involves payment not only for damaged property (cars, houses, electric poles, fences), but also for damage to the he alth of passengers or other participants in a road event.

To receive insurance compensation or accrue payment to the injured party, thea number of conditions:

• the car is driven by the person specified in the insurance contract;
• non-refundable moral damages;
• vehicle is not used in rally, study or competition;
• intentional illegal actions of the insured;
• drunk driving, under the influence of drugs or opiates.

It should be noted that there are two types of compulsory civil liability insurance for car owners: domestic and international contracts. To travel abroad, the driver of the vehicle is also obliged to insure his liability. For this, there is an agreement on the Green Card, thanks to which a unified insurance policy operates on the territory of 31 states. The amount of obligations that the insurance company undertakes depends on the state in whose territory the emergency event occurred. The insurance contract applies to all persons who are driving the car specified in the policy.

Responsibility of the Appraiser

Another type of civil liability insurance, which is mandatory, legally approved is the appraiser's liability. In carrying out his valuation activities, he may inadvertently cause material losses to his customers. In order to minimize the losses of this profession, when obtaining permission to conduct appraisal activities, an insurance agreement is mandatory drawn up with a specialized financial company.

Payment of insurance compensation for this type of compulsory liability insurance is carried out by a court decision. It is also possible to compensate for the losses caused by the client if the insurer agrees that the insured event actually took place without waiting for a judicial act. The sum insured is paid to a third party. The amount of payment depends on the actual material losses, but it cannot exceed the insurance liability of the financial company under the terms of the concluded contract.

Carrier liability

Among the existing types of compulsory liability insurance, attention should be paid to the liability insurance of cargo carriers by road, sea and air transport. The main regulatory documents that determine the amount of insurance liability and fees are international conventions on the carriage of goods and the domestic legal framework.

This type of carrier liability insurance is mandatory to protect consignees or passengers from possible violations as a result of the delivery of cargo or baggage or causing harm to their he alth. Insurance compensation is paid to injured persons or beneficiaries in the amount of actually incurred property losses, the cost of treatment or upon death.

Responsibility of companies - sources of increased danger

The activities of some enterprises and organizations initially pose a danger, based on the work they carry out. Yes, refills.fuels, lubricants and gas can create an emergency as a result of a gasoline leak or an explosion of containers. Nuclear and power plants are also necessarily such hazardous facilities. The owners of such enterprises are required to have an insurance agreement with a specialized company that has assumed responsibility for losses directly related to the insured's production activities.

Under current civil code, dangerous sources include:

• mechanical devices, equipment whose operation cannot be fully controlled;
• industrial human activities related to atomic, nuclear, electrical energy, flammable and explosive substances.

The presence of a contract for this type of liability insurance allows the head of a hazardous facility to transfer the amount of losses to the insurance company for such events:

• damaging or destroying property;
• not receiving the planned profit;
• pecuniary damage;
• ill he alth or death of affected people;
• spending on elimination of the results of an insured event.

Broker Liability Insurance

In order to carry out the work of a customs representative, a necessary condition is the inclusion of a potential broker in the register of customs representatives. Insurance companies, based on the approved types of compulsory insuranceresponsibility, offer the execution of an insurance contract, without which the customs broker will not be able to be registered in the register. Its presence is mandatory.

Insurance organizations assume responsibility to cover property losses caused by the customs representative by their actions, or inaction associated with the performance of a certain set of works. In addition to property damage, an insurance document can cover the costs of litigation by lawyers and invited experts.

An insured event is considered to have taken place upon presentation by the broker's client of property claims that are directly related to poor-quality provision of services, namely:

• failure to comply with the deadlines for the provision of customs documents;
• incorrect calculations of customs duties, which were paid in an inflated amount;
• pen alties for violation of customs clearance procedures;
• disclosure of commercial or other confidential information.

Auditor liability insurance

Another type of liability insurance is auditors' insurance. For the implementation of audit activities, the current law provides for the mandatory existence of an agreement with an insurance company. Various types of liability insurance contracts offered by insurance organizations to their customers also include mandatory liability insurance for auditors.

Duringcarrying out their activities, specialists can, by their actions of an unintentional nature, cause property damage or damage to the state of he alth of customers of services. Insured events include:

• error in assessing activities and compliance with its regulatory documents;
• misinterpretation of audit results;
• not detecting significant shortcomings in financial documents;
• non-compliance with approved accounting and reporting standards, tax laws;
• accidental loss or damage to financial documents such as money orders, declarations, cheques, tax invoices and invoices.

For this type of liability insurance, the insurer reimburses the amount of pen alties imposed. The services of another audit company are also subject to payment if the loss was caused by unprofessional actions of the auditor, whose liability is insured. In case of loss of documents, the insurance company compensates the cost of registration of new documents, notarized copies. In addition, if funds are spent during the clarification of the circumstances of the event, such expenses are also subject to compensation at the expense of the sum insured.

The financial services market, like the entire insurance industry, is under development. And if property risks, or even the general concept and types of liability insurance, such as OSAGO, are familiar to most consumers, then voluntary liability insurance is closefaced only by a narrow circle of specialists. Although the existence of such an agreement allows you to protect yourself from additional material costs in the event of an event specified in the agreement.