What is meant by Legal Liability in the context of insurance?

Legal liability in the context of insurance refers to a person's or organization's responsibility for causing injury or damage to another individual or entity. When an insured party is deemed legally liable, it means that they have a legal obligation to compensate the affected party for their losses. This could include costs associated with medical treatment, property damage, or other related expenses resulting from their actions or negligence.

Insurance often serves to protect individuals and organizations from the financial burdens associated with liabilities. When a claim arises, the insurer may step in to provide defense and coverage for damages, depending on the terms of the insurance policy. Understanding legal liability is crucial for both insureds and insurers to navigate the complexities of claims and coverage.

In contrast to the other options, which discuss bankruptcy status, notification obligations to insurers, and the defense duties of insurance companies, legal liability is fundamentally about the responsibility for harm inflicted on others, making it a core concept in insurance.