Legal Definitions - casualty insurance

Casualty insurance is a broad category of insurance that primarily protects individuals and businesses against financial loss resulting from their legal liability for causing harm to others or their property. It covers situations where the insured party is found responsible for an accident, injury, or damage, and must pay compensation to the affected party. While often focused on liability, it can also cover certain direct losses to the insured's own property from specific events.

Here are some examples to illustrate casualty insurance:

• Scenario 1: Business Premises Liability

  A small bookstore owner has a customer slip on a recently mopped floor that was not properly marked with a "wet floor" sign. The customer falls, breaks their wrist, and incurs significant medical bills. The bookstore's general liability insurance, a form of casualty insurance, would cover the customer's medical expenses, lost wages, and any potential legal fees if the customer sues the bookstore for negligence. This illustrates how casualty insurance protects the business from financial losses due to its legal responsibility for an injury occurring on its property.

• Scenario 2: Automobile Accident Liability

  While driving, a person accidentally runs a red light and collides with another vehicle. The collision causes substantial damage to the other car and results in injuries to its driver. The at-fault driver's auto liability insurance, which is a type of casualty insurance, would pay for the repairs to the other vehicle and the medical expenses of the injured driver. This demonstrates how casualty insurance covers the financial burden of legal liability for causing harm to others and their property through an automobile accident.

• Scenario 3: Professional Negligence

  An architect makes a critical error in the structural design plans for a new commercial building, leading to significant construction delays and requiring costly redesigns and repairs. The client suffers substantial financial losses due to these delays and additional expenses. The architect's professional liability insurance (also known as errors and omissions insurance), a specialized form of casualty insurance, would cover the architect's legal defense costs and any damages awarded to the client for the financial harm caused by the professional error. This shows how casualty insurance can protect professionals from claims arising from their alleged negligence or mistakes in their professional services.