What Is Not Covered by Liability Insurance?

Liability insurance provides financial protection against claims from third parties for bodily injury or property damage you cause. While it offers a layer of security, no single policy covers every possible risk. Understanding what liability insurance does not cover is just as important as knowing what it does, allowing individuals and businesses to address potential gaps in their protection.

General Exclusions from Coverage

Many situations are excluded from general liability policies, whether personal or business. These exclusions are fundamental because liability insurance covers unexpected accidents, not deliberate actions or self-inflicted damages.

Intentional acts, where you purposefully cause harm or damage, are excluded from liability coverage. For example, an assailant’s liability insurance would not cover a victim’s injuries from a physical assault. Coverage is also denied if an action was expected or intended to cause injury, even if the specific injury was not the precise outcome.

Punitive damages, which are awarded to punish a wrongdoer rather than compensate the injured party, are excluded from coverage. While compensatory damages, covering actual losses like medical bills or property repair, might be covered, punitive amounts are often not insurable in many states. This exclusion aligns with the policy’s purpose to cover unforeseen events, not penalties for egregious behavior.

Liability insurance protects against claims from third parties, meaning individuals outside of yourself or your household. Bodily injuries sustained by the insured person or family members residing in the same household are typically excluded. Damage to your own property is not covered by liability insurance, as it focuses on damage you cause to the property of others.

Broad exclusions exist for catastrophic events such as war, nuclear hazard, and terrorism. These large-scale incidents are uninsurable due to their immense and unpredictable nature. Such exclusions are standard across many insurance forms, reflecting a global understanding of what constitutes an insurable risk.

Liabilities Requiring Separate Policies

Certain liabilities are excluded from general liability policies because they require specialized insurance. These are distinct areas where different policies are necessary to provide adequate protection.

Professional services liability, often known as errors and omissions (E&O) insurance or professional indemnity, is an example. General liability insurance does not cover claims arising from professional negligence, mistakes, or failures in the services provided by professionals such as accountants, consultants, or doctors. These specialized policies address financial losses incurred by clients due to professional errors.

Injuries sustained by employees in the course of their employment are another exclusion from general liability coverage. These claims fall under workers’ compensation insurance, which is mandated by law in most states for businesses with employees. Workers’ compensation provides benefits for medical expenses and lost wages to injured workers, distinguishing it from general liability which covers third-party injuries.

Environmental pollution is largely excluded from standard general liability policies. Most policies contain broad pollution exclusions, often referred to as “absolute pollution exclusions,” that deny coverage for bodily injury or property damage arising from pollutants. Businesses with environmental risks typically need separate pollution liability insurance to cover cleanup costs and related damages.

Cyber liability and data breaches represent a growing area of risk not covered by general liability policies. Liabilities stemming from data breaches, network security failures, privacy violations, or the loss of electronic data are excluded because general liability focuses on physical injury and property damage. Dedicated cyber insurance policies are essential for protecting against these digital risks.

Liabilities arising from the ownership or use of aircraft and certain watercraft are typically excluded from standard general liability policies. Operating these types of vehicles presents unique and elevated risks that necessitate specialized aviation or marine insurance coverages. These specific policies address the distinct hazards associated with air and water travel.

Contractual and Assumed Liabilities

Liability insurance policies generally exclude liabilities that you voluntarily take on through a contract or agreement, rather than those imposed on you by law. This distinction is important because the policy is designed to cover your legal responsibility for torts (civil wrongs), not obligations you willingly accept.

Hold harmless agreements are a common example, where one party contractually agrees to indemnify or protect another party from certain liabilities. If you sign such an agreement, your general liability policy may not cover claims arising from the assumed liability unless specific contractual liability coverage is added or an exception applies, such as for an “insured contract.” These agreements essentially transfer risk, and insurers typically do not cover risks you choose to assume.

Liability insurance generally does not cover damages resulting from a breach of contract. While torts involve duties imposed by law, a breach of contract involves failing to fulfill obligations agreed upon in a formal agreement. Insurers do not typically indemnify for financial losses that arise solely from a failure to perform contractual duties.

Property in Your Care, Custody, or Control

A frequent exclusion in liability policies concerns property that belongs to someone else but is temporarily in your physical possession or under your supervision. This is commonly referred to as the “care, custody, or control” (CCC) exclusion. If you damage such property, your general liability policy often will not cover the loss.

This exclusion applies when you have temporary charge, safekeeping responsibility, or direct power over someone else’s personal property. For example, a mechanic damaging a customer’s car while it is in the repair shop would likely face this exclusion. Similarly, a cleaner accidentally damaging an item in a client’s home or a computer repair technician dropping a customer’s laptop would find their general liability policy typically excludes such damage. This exclusion does not typically apply to real property like buildings.

To address this specific gap, businesses that regularly handle clients’ property often need to purchase specialized policies. Examples include garage keepers insurance for auto repair shops or bailee coverage, which provides protection for property entrusted to your care for transportation, storage, or maintenance. Understanding this exclusion is important for any business or individual who takes temporary possession of others’ belongings.