ABSTRACT
This chapter sets out the basic principles applicable to liability insurance, and deals with the rights of third parties following the assured’s insolvency under the Third Party Act 2010. The assured suffers a loss for the purposes of liability cover only when the existence and extent of its liability to the third party is determined, i.e. the liability must be both ascertained and quantified. Ascertainment and quantification of liability can be achieved by a judgment or arbitration award against the assured, or by way of a bona fide settlement reached between the assured and the third party which is based on legal liability. The purpose of a liability policy is primarily to cover negligence. Cover does not usually extend to pure contractual liability, although contractual liability in respect of which there is parallel tortious liability is covered.
