Diverse forms of legal liabilities towards third party risks are covered under the Liability Insurance. Recently this form of insurance has started gaining ground in India. Liability Insurance has various kinds, such as third party liability insurance, professional indemnity insurance, employer’s liability insurance etc. Liability Insurance is a kind of contract of indemnity and thus, until the insured has suffered a loss, no obligation arises on the part of the insurer to pay the amount claimed. In case of third party liabilities insurance, the third parties are permitted to claim damages directly from the insurer. For instance, award of compensation to a third party under the Motor Vehicles Act, 1988. In recent times, a new concept of “no fault liability” has come into effect in public liability insurance. The principle of “no fault liability” is based upon public policy and social welfare. For instance, the Public Liability Insurance Act, 1991 and the Motor Vehicles Act, 1988 contain provisions imposing liability upon the insurer and the assured to pay certain amount without any proof of liability against them.
