What does Liability mean?

Liability refers to one’s lawful obligation to compensate for damages (either property or injury) inflicted on another (third) party.

The liability terms / regulations as set out in the Bürgerliches Gesetzbuch (BGB) (German Civil Code) form the basis for German Liability. Further liability terms can be found in specific legislations, such as for example the laws regarding Product Liability, Household Water Liability, Environmental Liability, Air Transport Liability, Pharmaceutical Liability etc.

What Liability Insurance does

Liability Insurance exists to indemnify the policyholder from claims made against him for loss of, or damage to third party property or personal injury to third parties, hence assuring the protection of the policyholder’s assets. The limit of coverage purchased, i. e. the sum insured, is a matter of choice.

The Insurer’s duty to provide indemnification

The insurer assumes the responsibility for examining the question of liability on behalf of the policyholder, to establish whether and to what extent there is an indemnifiable loss, and as required, to undertake the settlement of legitimate claims and conversely, the rejection of unfounded claims. Should a legal battle ensue, the insurer will handle and pay for the proceedings.

How does Liability arise and what are the different kinds of Liability Insurance?

Liability risk and claims can arise from all kinds of activities and legal contexts, such as for example the manufacture and distribution of products, the importation of goods from countries outside the EU, sales, consultancy, construction activity, the ownership of land and property, the management and operation of environmentally sensitive equipment, such as oil storage facilities. The list is literally endless.

In liability there is no standard form of cover, rather there are different classes of liability:

• Professional liability and employers liability
• Professional indemnity
• Products liability
• Environmental impairment liability
• Householders and houseowners liability
• Directors and officers liability
• Aviation liability
• Livestock keeper’s liability
• Personal liability
• Etc.

These various classes of liability are often combined in a single insurance policy. Accordingly, there are numerous and varying forms of coverage and consequently differences in premium and forms of indemnity which can be of particular importance in case of a loss.

The limit of indemnity (sum insured) should be commensurate with the perceivable level of potential loss; overinsurance is pointless extravagance, and underinsurance, inexcusable recklessness.

Liability insurance shields your assets and should therefore be of, at least, equal importance to you as your property insurance policy.

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