Liability also known as General Liability Insurance
provides protection for the policyholder from Bodily Injury (injuring someone) or Property Damage as a result of an unforeseen accident, negligence or unintended situation.
Example: Owner of property with no structures needs liability in case someone walking across the property falls in a hole that should have been filled.
Contractors especially need liability for the damages that they may cause during in the course of their work.
Contractor Example: A plumber is working in a building and has a large wrench in his hand. He turns around not knowing someone was their and he insures that person. This is bodily injury. Again while working he places the wrench on the counter and chips the granite. This is property damage. This type of liability that provides coverage while on the job is called premises and operations. One more example: The plumber now goes home and the building has a fire in it. The cause of the fire is the boiler that the plumber was working on. Due to his negligence of not hooking up the safety switch the fire is determined to be caused by the plumber. This type of coverage is called completed operations because the fire (occurrence) happened after the plumber left the building.
Liability insurance will not provide coverage if a contractor walks off a job. (The policyholder did not cause bodily injury or property damage.) Workmanship is also not covered. (Insurance is not a warranty) If a contractor does a poor job there no coverage. No bodily injury or property damage was done.
Manufacturer Example: A fan is manufactured and sold and found to have a faulty guard breaking causing injury to the user. This is called products liability. The reseller of this fan can be sued in addition to the manufacturer therefore coverage is needed. Store owners and internet resellers need this coverage.
If the policyholder is not at fault they need to defend themselves if brought into a lawsuit. The insurance company will defend the policyholder.
Automobile liability: All states require automobile liability insurance for the damages that the driver of a vehicle may cause to other people, property, or objects.
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