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What is third party liability insurance and why is it so important?
Third party liability is the most important, and sometimes mandatory, element of a motor or a personal insurance policy. It makes sense, as this principle is one of the pillars of society – who breaks pays. Well, not quite, that is what third party liability insurance is all about, it comes into play on your behalf and protects your money.
What is third party liability insurance?
The third party liability insurance protects you in the event of damage that you unintentionally cause to third parties in the context of your private life. It generally appears in the home insurance contract (water damage, flying tiles, broken window at a friend’s house, etc.), car insurance (material damage, injuries, etc.) or even in corporate civil liability insurance (professional).
Which third party liability insurance is mandatory?
Private liability insurance is not mandatory in Luxembourg (unless you own a dog). That said, it is highly recommended to protect yourself, especially as this type of insurance is inexpensive. More than 80% of households in Luxembourg take out private liability insurance.
Motor third party liability insurance, on the other hand, is mandatory if you want to drive your vehicle on the public highway. It is the minimum cover that must be included in your car insurance policy in order to drive. If you do not have this insurance, you will be liable to an administrative fine.
Professional third party liability insurance is sometimes mandatory, sometimes not, depending on the activity carried out. However, as for coverage for your private life it would be foolish not to have a policy in place, given the low cost that this represents in relation to the risks covered.
The different types of third party liability insurance
Third party liability insurance takes different forms depending on whether it concerns your private life, your professional occupation or your vehicle. The three most common types of third party liability insurance are motor third party liability, personal third party liability and operating third party liability. Here is what each offers as a minimum cover.
What does motor third party liability cover?
Motor third party liability is the most basic type of motor insurance. It is included in all car insurance policies, regardless of the extent of the cover. It covers the damage we cause to others on the road:
- Damage to third parties (including damage to street furniture, signposts, etc. or roads): repair of anything damaged other than your vehicle.
- Consequences of the accident for third parties: their medical costs, incapacity to work, loss of income, etc.
- Damage caused to your passengers (but not to yourself)
What does private third party liability insurance cover?
Your third party liability insurance policy covers you and all members of your household.
Even if third party liability is taken out with your home insurance, it is not limited to damage to your home. It also applies wherever you are.
The insurance comes into play, for example, if your child breaks a window at his friend’s house while playing football. Or if you scratch a car in the supermarket car park with your shopping trolley. Or if, despite your foresight, someone slips on a patch of ice in front of your house (remember that you are obliged to clear your pavements).
Please note: the damage you suffer yourself is not covered.
What does operating third party liability cover?
Operating third party liability insurance is the equivalent of private liability insurance for companies. It covers the (extra-contractual) liability of the company for damage caused to third parties.
This damage can be caused by anything for which the company is responsible: its employees, equipment, building or services. Some examples:
- A sign that is too low or poorly attached injures a passer-by
- A painter leaves paint spots
- A digger damages an underground public cable
- A salesman spills his coffee on his client’s computer, who loses all his data
The damage covered must be related to the life of the business and not to the profession exercised or the services provided. These fall under contractual liability and are covered by another type of third party liability: professional third party liability (there are almost as many professional third party liability policies as there are professions).
What is not covered by third party liability insurance?
It does not work in the event of (non-exhaustive list):
- Damage caused intentionally
- Damage caused to oneself
- Damage caused to others during your professional activity (most of the time it is the employer’s guarantee that will intervene).
The principle of compensation
The Civil Code stipulates that each person must make amends for the damage they may cause to others, even if it is unintentional: this is the principle of compensation (in other words, third party liability).
The 3 conditions that incur regarding your third party liability are:
- damage suffered by the victim,
- a “liability-generating” act attributed to the perpetrator of this damage,
- a causal link between this act and the damage.
This is sufficient to incur your third party liability in a large number of situations: in the event of damage caused by yourself, your children, your employees (cleaning lady, baby-sitter, gardener, etc.), or even by “the things in your care” (the fall of a roof tile, for example).
If the damage is due to an accident without any party being at fault, there is no liability. In this case, personal accident insurance can cover personal injury.
