Liability insurance is a part of the general insurance system of risk financing to protect insured from the risks of liabilities imposed by lawsuits and similar claims.

It is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss that is not a party to the insurance contract.

Liability insurers have two (or three, in some jurisdictions) major duties:

1) The duty to defend,

2) The duty to indemnify and (in some jurisdictions),

3) The duty to settle a reasonably clear claim.