Third-party claim
A request for payment from someone other than the policyholder or the insurer, made because the policyholder allegedly caused covered injury or property damage. The policyholder's liability coverage may pay the injured person, settle the claim and provide a legal defense, but only within the policy's coverage, exclusions, conditions and limits.
Also called: third party
A third-party claim runs against someone's liability coverage rather than their own protection. If you cause a crash, the other driver's demand against your policy is a third-party claim; if someone else causes it, your demand against their insurer is one too. Either way, the at-fault person's liability limits cap what the insurer pays, and that insurer may also provide a legal defense. The first steps are the same on both sides: report the claim, cooperate, keep records and read any release before signing it.
How a third-party claim gets paid, with real numbers
The "third party" is a person other than the insured or insurer who has incurred losses or is entitled to payment because of the insured's acts or omissions, according to the NAIC glossary of insurance terms (opens in a new tab). Take an illustrative crash in which you are legally responsible and carry Connecticut's minimum limits of $25,000 per person for bodily injury and $25,000 for property damage, as listed by the Connecticut Insurance Department (opens in a new tab). The other driver has $18,000 of vehicle damage and $32,000 of bodily injury damages, and your liability coverage has no deductible.
Hover or tap a row to highlight it.
| Claim | Damages | Limit | Your insurer pays | Left unpaid |
|---|---|---|---|---|
| Property damage | $18,000 | $25,000 | $18,000 | $0 ($7,000 of the limit remains) |
| Bodily injury, one person | $32,000 | $25,000 per person | $25,000 | $7,000 |
The $7,000 above the bodily injury limit may become your personal responsibility unless another source of recovery applies. Damages above purchased limits stay with the insured, according to the California Department of Insurance's auto insurance guide (opens in a new tab). The loss amounts are illustrative, not an average.
Limits and coverages that change the outcome
A claimant generally must establish coverage, causation, damages and the insured's legal responsibility, and the insurer can dispute any of them. What is available then depends on these settings:
- Split limits. Separate caps per person and per accident for bodily injury, plus a property damage limit, such as $25,000/$50,000/$25,000 in Connecticut. New York's minimum is $25,000/$50,000 for bodily injury and $10,000 for property damage, according to the New York DFS auto insurance page (opens in a new tab).
- Combined single limit. One maximum for bodily injury and property damage together.
- Higher limits. These raise the most the insurer can pay and generally change the premium; the exact cost has to be quoted.
- Deductibles. They usually apply to your own collision, comprehensive or property coverage, not to an injured person's liability claim against you, though the policy and state law control.
- Your own coverages when the other side falls short. Collision, medical payments, personal injury protection, and uninsured or underinsured motorist coverage can respond when the at-fault driver has no insurance or too little, depending on the policy and state.
A first-party claim is one you make against your own policy. Subrogation is different again: after paying you, your insurer recovers from the responsible party, which is not the same as the injured person claiming directly.
Where you see the term
Third-party claims arise mainly under auto liability, the personal liability section of homeowners, renters and condo policies, commercial general liability, professional and product liability, and umbrella or excess policies. In life, disability and pet insurance documents, "third party" can instead mean a beneficiary, provider or assignee. On paper, you see your liability limits on the declarations page, and the claim itself in claim acknowledgments, reservation-of-rights letters, settlement letters, releases and lawsuit papers. The guide to filing a car insurance claim covers the reporting steps after a crash.
What Connecticut and New York add
Connecticut sets minimum auto liability limits of $25,000 per person, $50,000 per accident and $25,000 for property damage under Conn. Gen. Stat. § 14-112 (opens in a new tab). Connecticut's minimum policy provisions define property damage to include loss of use, so when liability is reasonably clear, an insurer must address loss-of-use payments in a third-party property damage claim, according to Connecticut Insurance Department Bulletin CL-1-07 (opens in a new tab).
In New York, Insurance Law § 3420 (opens in a new tab) treats notice from an insured, injured person or other claimant to a licensed agent as notice to the insurer, and late notice does not void a claim unless the insurer was prejudiced, subject to exceptions. After a written request from an injured person or claimant, the insurer must confirm within 60 days whether a liability policy existed and state its limits. A denial of coverage for death or bodily injury from a motor vehicle accident must be sent in writing to both the insured and the injured person as soon as reasonably possible. No-fault coverage pays specified economic losses up to $50,000 per person, and a third-party lawsuit for pain and suffering requires a serious injury as defined in Insurance Law § 5102 (opens in a new tab).
Questions to ask an agent or insurer
- Is this claim against my liability coverage or my own first-party coverage? The answer sets the insurer, the deductible rules and the claim process.
- What are my bodily injury and property damage liability limits? They cap the insurer's payment and can leave you responsible for the rest.
- Does my policy provide a legal defense, and does defense cost reduce my limits? In New York, the insurer must defend covered third-party claims without reducing the liability limits, but confirm the wording.
- What happens if the other driver is uninsured or has limits too low to cover the loss? Collision, PIP, medical payments or uninsured and underinsured motorist coverage may offer another route.
- Before I sign this release, which claims does it end? A release can end further recovery for the injury or damage its wording covers.
Frequently asked questions
A few more questions come up when a claim letter arrives or when you try to recover from another driver's insurer.
Is the other driver's insurer working for me?
No. That insurer protects and evaluates its own policyholder's liability under its policy. You have no insurance contract with it, so coverage and fault can both be disputed.
Can a third-party claim against me affect my renewal?
It can. Claim history and underwriting rules may affect future eligibility, rating, surcharges or renewal decisions, and the result varies by state and insurer. Ask your insurer how the claim will be classified.
Do no-fault states handle third-party claims differently?
Yes. In a no-fault system, your own PIP coverage generally pays specified economic losses first, regardless of fault, and state thresholds can restrict bodily injury lawsuits. Connecticut is a tort state, where the injured person generally pursues the at-fault driver's liability coverage, according to the NAIC Auto Insurance Database Report (opens in a new tab).