Casualty insurance
Also known as: liability insurance
Casualty insurance covers an insured's legal liability for injury to other people or damage to their property. Unlike property insurance, which pays for the insured's own losses, casualty coverage pays third parties on the insured's behalf.
Casualty insurance is the liability half of the property and casualty world. Property coverage indemnifies the insured for damage to their own building, contents, or vehicle. Casualty coverage responds when the insured is legally responsible for harm to someone else — a customer who slips in a store, a driver struck in an at-fault accident, a neighbor's fence destroyed by a falling tree. The payment goes to the injured third party, not to the insured.
Most casualty policies contain two distinct promises. The duty to indemnify pays damages the insured becomes legally obligated to pay, up to the policy limit. The duty to defend obligates the insurer to provide and pay for legal defense against covered claims — and this duty is broader, applying even to groundless or fraudulent suits, with defense costs typically paid in addition to the limit of liability. Liability limits are often expressed as split limits, such as 100/300/50 on an auto policy: $100,000 per person for bodily injury, $300,000 per accident, and $50,000 for property damage.
Coverage is generally triggered by an occurrence — an accident, including continuous exposure to harmful conditions, that results in bodily injury or property damage neither expected nor intended by the insured. That wording matters: intentional acts are excluded, as are liabilities assumed for business risks that belong in specialized policies. Common casualty lines include personal and commercial auto liability, commercial general liability, professional liability, workers' compensation, and umbrella or excess liability that sits above underlying limits.
Because liability judgments can far exceed the value of any single piece of property, casualty coverage is the part of a program that protects the insured's overall financial position. Property and casualty, casualty-only, and personal lines licensing exams all test the property-versus-casualty distinction, the difference between the duty to defend and the duty to indemnify, and how split liability limits apply to a given loss.
Key takeaways
- Casualty insurance covers the insured's legal liability to third parties for bodily injury and property damage.
- Property insurance pays the insured for their own losses; casualty insurance pays others on the insured's behalf.
- The duty to defend is broader than the duty to indemnify and usually covers defense costs outside the policy limit.
- Split limits such as 100/300/50 cap payment per person, per accident, and for property damage separately.
- Auto liability, general liability, professional liability, workers' compensation, and umbrella policies are all casualty lines.