Insurance Coverage if You Cause an Accident: Third Party Liability Coverage

If you partially or wholly cause an accident, you are at risk of being sued by anyone who had suffered a loss in the accident.These losses include, but are not limited to, the other party’s medical expenses, personal injury and property loss (e.g. vehicle damage). Third party liability coverage intends to protect you against such claims.

The term Third Party refers to a person other than yourself (the “first party”) and your insurer (the “second party”).  Depending on the situation, a third party could be another driver, a passenger in your vehicle or a bystander. If a third party is injured in an accident that you caused or contributed to then that third party can sue you for losses as described above. Without third party liability coverage you would be directly personally responsible for compensating the third party for their loss. If you have third party liability coverage your insurer will defend you against third party claims, and pay out the third party claim up to your policy limits. For example, if a passenger advances a claim against you for injuries that passenger sustained in an accident caused by you, the third party liability insurance will help to defend and pay out the third party claim.

Third party liability coverage is not without limitations. Those limitations will depend on your insurer and the type and amount of insurance you purchase. As an example, ICBC’s Basic Autoplan coverage provides up to $200,000 in third party liability coverage. Basic insurance for buses, taxis, limousines or heavy commercial trucks typically provides up to $1 million in third party liability coverage. If you wish to have more third party liability coverage, you can purchase third party liability insurance that provides more coverage.

It is a good idea to purchase additional third party liability coverage. This is demonstrated by the following example. If you just have the Basic Autoplan third party liability coverage of $200,000, and you are liable to a third party for the sum of $800,000, you would be personally responsible for the remaining $600,000 difference owed to the third party. On the other hand, if you had $1 million in third party liability coverage, you would be fully covered for the $800,000 sum owed to the third party.

There are likely to be exceptions to your third party liability coverage. You should read your insurance policy thoroughly and ask your insurance broker to explain these exceptions to you. Oftentimes, your third party liability coverage may not cover you if you have breached other terms of your insurance. As a further illustration, third party liability coverage from ICBC typically does not cover the following:

• damage to property that is inside your vehicle at the time of an accident;
• damage to equipment attached to your vehicle; and
• a claim that would be covered by the Workers Compensation Act.