What is a third-party loss?
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Homeowners insurance is an excellent resource to have when filing first-party losses for things like roof damage, personal property damage and flooding. Less common — yet equally as important — are the coverage options available for third-party losses. These instances occur when a file is claimed that involves the homeowner, the insurance company and a third party, such as a friend, family member or neighbor who does not live in the household.
It’s important for homeowners to understand the significance of having such coverages and what it can mean for them if they fail to have insurance that covers third-party losses.
What is a third-party loss?
A “third-party loss” is a situation that involves another person other than the insurance provider and the insured. More common are “first-party losses” that involve only the insurer and insured, such as roof damage to a covered home after a particularly bad storm.
Third-party losses occur most often when someone is injured on or by the insured’s property and decides to sue the insured for their damages.
The personal liability coverage stipulated in your homeowners insurance policy provides coverage to compensate homeowners for the following as a result of being sued by a third-party:
- Cost of legal defense
- Third-party medical expenses
- Property damage that occurs due to negligence
Third-party losses can occur as a result of the following and similar scenarios:
- Your pet attacks a visitor in your home
- The mail carrier slips and falls while on your property
- A member of your household causes accidental damage to another person’s property
Consult with your insurance provider to better understand what situations and expenses are covered under the personal liability portion of your homeowners insurance policy.
Who is at risk for third-party loss?
As aforementioned, litigation as a result of a Third-Party Loss is quite rare. However, there are certain individuals who may be more at-risk for experiencing such a lawsuit. These individuals include the following:
- Homeowners with children
- Farmers and ranchers
- Pet owners
- Homeowners with unfriendly neighbors
- Homeowners with elderly friends, neighbors or relatives
Many third-party Losses are a result of damage caused by children and pets, making parents, pet owners, farmers and ranchers more likely to experience such cases.
Additionally, because elderly people are more prone to falling and getting injured, homeowners that frequently play host to elderly visitors may be more at risk for being part of a personal liability case.
Finally, those with unfriendly neighbors may also be at higher risk for a third-party loss. However, there are laws specifically in place to protect homeowners from claims filed in bad faith.
What should you do in third-party loss situations?
When such an incident takes place on your property, remain calm and remember the following:
- Call for help: Depending on the severity of the situation, you’ll want to call the appropriate authorities or emergency personnel so they can provide assistance to the injured party.
- Document the events: Keep a careful log of all events that transpire, including any witness testimony, police reports and medical treatment rendered.
- Communicate with your provider: You will be notified by your provider if a third-party files a claim against you following such an event. In this case, be prepared to provide them with any evidence you have documented as this will aid in their investigation.
After a third-party loss situation occurs, your insurance provider will conduct a thorough investigation to determine who is responsible for the accident. If necessary, the insurer will need to defend you in court and will pay out any damages to the claimant that result from a jury verdict or out-of-court settlement.
How to prevent third-party loss
Preventing a third-party loss situation from taking place requires a proactive approach by the policyholder. The following are some simple ways homeowners can help reduce the likelihood of becoming subject to a third-party claim:
- Keep walkways, entrances, and stairs well-lit and free of any debris, ice, water, snow, rocks or other obstructive materials.
- Ensure railings are property installed and secured on all stairs.
- Keep pets on a leash outside or place in a separate room while visitors are present.
- Help elderly visitors move around the property safely.
- Supervise children and instruct them on proper behavior while at others’ property.
By taking a few precautionary steps now, you can avoid becoming the target of a third-party Loss situation in the future. Always remain vigilant whenever others are visiting your home — especially if they are visiting for the first time.
Similarly, refrain from allowing children to visit others’ property for the first time unsupervised: Even if your child causes damage to another’s property while away from your home, you may still be subject to a third-party claim.
While removing risk altogether may not be possible, these simple steps can significantly reduce the likelihood that you will suffer a third-party loss.
- Third-party losses occur when a person who is not the insurance provider or the insured files a claim for damages.
- Third-party loss situations can arise as the result of a slip-and-fall accident, dog bite or property damage caused by a member of our household on another’s property.
- With personal liability insurance, the insurance provider will pay for any damages deemed necessary by a jury or court order, including medical expenses and legal fees.
- Following a third-party loss event, homeowners should carefully document everything that transpired and keep an open line of communication with their provider.
- By following a few simple steps, homeowners can help prevent a third-party loss situation from taking place on their property.
If someone is injured on your property or a member of your household damages another person’s property while away from your home, you may be subject to a third-party loss. However, if you have personal liability insurance through your homeowners’ insurance policy, your provider will be able to pay for any damages up to a certain amount that’s stipulated within your policy outline.
By taking a few safety precautions now, homeowners can prevent against the likelihood of being involved in such claims. If you have questions regarding third-party loss situations and how they are handled, consult with your insurance provider to better understand your breadth of coverage and the options available to you.