Third-Party Claim
What Is a Third-Party Claim?
A third-party claim is when someone other than you — the policyholder — asks your insurance company to pay for an injury or damage they say your business caused. This could be a customer, client, landlord, or other person/organization.
Third-party claims are the crux of liability insurance, which is there to save you from paying out of pocket for other people’s losses.
How Does a Third-Party Liability Claim Work?
Third-party claims are filed by other people outside of your business. If the loss is covered by your policy, then they receive the payout. This is the opposite of what happens with a first-party claim, which is when you file to ask your insurance company to pay for your loss.
Swipe →
| Role | Who This Usually is | What They Might Do |
|---|---|---|
|
First party |
You, the policyholder (your business) |
Buy the policy, report the incident |
|
Second party |
Your insurance company |
Investigates, defends, and may pay the claim if covered by your policy |
|
Third party |
Someone outside your business (customer, client, landlord, etc.) |
Says your business caused harm or damage |
What Are Some Examples of Third-Party Claims?
There are many reasons a third party might file a claim against your business, depending on what you do and what your products or services are.
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| Business Type | What Happened | Reason for a Third-Party Claim |
|---|---|---|
|
Retail shop owner |
A customer slips on a wet floor and breaks their wrist |
The customer (third party) accuses your business of negligence and blames you for the injury |
|
Contractor |
You accidentally break a client’s window |
The client (third party) wants you to pay to replace the window |
|
Food vendor |
A customer gets sick after eating your food |
The customer (third party) claims your product caused them harm |
|
Photographer |
Your tripod falls and damages a venue’s flooring |
The venue (third party) seeks payment for repairs |
|
Online consultant |
Client says your advice cost them money |
They blame you for their financial losses and seek repayment |
What Should I Do If Someone Makes a Third-Party Claim?
If a third party makes a claim against your insurance policy, be sure to:
- Remain calm and professional: This situation may be stressful, but it’s important to remain polite and not argue over who’s to blame
- Collect the facts: Get all the essential information about the incident, including date, time, location, a description of what happened, and a list of who was involved
- Document everything: You should have the contact information of the person filing the claim and any witnesses, as well as photos and/or videos of the damage (if applicable)
- Save any related records: This includes contracts, emails, incident reports, receipts, work orders, security footage, etc.
- Notify your insurance company ASAP: Share what happened and provide them with any letters, emails, or legal notices you received from the third party
- Don’t admit fault or promise payment: Your insurance company will investigate the claim and respond on your behalf, so remain neutral when dealing with the third party
Additional Resources
Related Terms
- Bodily injury
- Insurance claim
- Deductible
- Defense costs
- First-party claim
- General liability insurance
- Negligence
- Property damage
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