Legal Liability Insurance: An Overview

In South Africa, legal liability insurance plays a pivotal economic role in the allocation of risk and maintenance of financial security and financial stability of its citizens.  Legal Liability or Third Party insurance focuses on the negative elements in the form of liabilities which the insured may be exposed to, whereas first party insurance, in contrast is concerned with the insured's patrimony.¹ Liability may arise due to various reasons such as contract, delict, unjustified enrichment, administration or statue.

Legal Framework for legal liability insurance:

There is little authority in the form of law reports and statutory regulation. Jacobs, W notes that statutory provisions are fragmented and that common law and judicial decisions remain our principal source of liability insurance contract law in South Africa². The Short Term Insurance Act, the definition section for which has since been revoked,³ defines a "liability policy" as a contract in terms of