Liability Insurance is a common insurance policy taken out by businesses and sometimes as part of a property insurance policy that covers the insured against losses that are their own fault, aka what they are liable for. In the case of business liability insurance a common example are employee accidents due to negligence. In the case of property insurance, a common example would be significant fire damage caused by a cooking accident. Both were not intentional, but were at the fault of the policy holder.
In the case of businesses, a substantial part of employers liability insurance goes to cover the legal costs involved with dealing with somebody that might have taken out a lawsuit following an injury that wasn’t their fault, and not necessarily the medical and health costs associated with the injury, which would normally be covered by other medical or health insurance policies. Sometimes as part of employer medical or health insurance policies there is a clause that prevents employees from taking out lawsuits, therefore erasing the need for most liability insurance coverage.
A substantial amount of professional liability insurance coverage may actually be paid out to the person making a claim against the business in the form of compensation or an out of court settlement. In this case the insurance company will defend the business so they do not lose the money that has been paid in to the policy.
Commercial liability insurance is often compulsory for many businesses. A shopping outlet for example would need public liability insurance if a shelf collapsed on to a customer. A restaurant would need liability insurance for any harm caused by food, or if a customer slipped on a wet floor near the rest room. There are many situations where this type of insurance would be needed.