Third Party Liability Insurance – Basics

What is Third Party Liability Insurance?

Third party liability insurance is one of the many types of insurance offered on the insurance market. It can be voluntary or mandatory. The only third party liability insurance that is required to be taken out is motor vehicle insurance.

The subject of protection in insurance contracts is the property of the insured. The Insurance Code explicitly introduces the obligation of the insurer to cover property and non-property damages caused by the insured to third parties. The requirement is that these damages are directly and immediately caused as a result of the insured event, and their coverage is within the limits of the insurance sum specified in the contract.

It is possible for the insurance to cover liability for non-fulfillment of a contractual obligation of the insured. In this case, the insurer covers the lost profits caused by non-fulfillment of a contract for an additional premium, this rule being dispositive, meaning that the parties may agree otherwise. Interest for late payment is also included, when the insured is responsible for their payment to the injured party, but always within the insurance amount.

In principle, the form of the insured's fault does not matter. Both intentionally caused damage and those caused by negligence are subject to compensation. However, in cases where the insured acted intentionally, then the insurer may ask the insured to reimburse him the amount that he has already paid to the injured person. The insurer does not have the right to seek the amount from the insured only when the insured acted negligently.

The injured party has, on the one hand, a claim against the person who caused the damage, and on the other hand, a claim against the insurer. However, he can only receive compensation for the damage caused to him once. Therefore, the injured party only chooses from whom to seek it.

When is it concluded?Motorists' civil liability insurance?

Motor third party liability insurance is mandatory for every person who owns a motor vehicle that is registered on the territory of the Republic of Bulgaria or that will be registered. Motor third party liability insurance covers both tortious liability and contractual liability. They are covered both material and non-material damages, as well as losses suffered and lost profits.

Motor third party liability insurance is the most common type of insurance in practice. The insurance risk in this type of insurance is the risk of the insured being liable for damages. The insurance covers the damages that the insured has caused to other road users by means of his/her motor vehicle.

What is property damage?

Property damages are expressed in a reduction in the property of the injured person. They are usually paid in the form of monetary compensation. There is a possibility, with the consent of the insured, for the insurer to compensate the damages in kind. In this case, the damages are removed by an external contractor.

What are non-pecuniary damages and which persons are entitled to compensation?

Non-pecuniary damages represent pain, suffering and other negative experiences that individuals suffer as a result of the occurrence of the insured event.

The question of which persons have the right to seek compensation for non-pecuniary damage has been controversial in practice for a long time. Therefore, the Plenum of the Supreme Court in two of its rulings has accepted that the persons who are entitled to receive compensation for the non-pecuniary damage caused are the closest to the victim, who are the children, the spouse and the parents of the victim. It is accepted that the right to compensation is also granted to the foster child, even if it is not adopted, the person raising it, as well as the person who lived in a marital relationship with the deceased.

The Supreme Court of Cassation (SCC) in its interpretative decision No. 1 of 2016 d. expanded the circle of persons entitled to compensation for non-pecuniary damage. As an exception, compensation for non-pecuniary damage may be received by any person who has created a lasting and deep emotional connection with the victim and endures prolonged pain and suffering. However, it is necessary to prove a particularly close relationship, as well as significant moral pain and suffering suffered immediately and over a prolonged period of time. A particularly close relationship may exist between the victim and his brothers, sisters, grandparents and grandchildren.

Author of the article – Gabriela Kostova

Editor – Nikolay Dimitrov