What Is the Third Party Claim Legal Definition?
It is something you should know if you are a defendant in a legal case attempting to bring in a third party to share your liability.3 min read
2. First Party and Third Party Insurance Claims
Updated October 29, 2020:
Third-party claim legal definition is something you should know if you are a defendant in a legal case attempting to bring in a third party to share your liability or the third party who has been brought into a case. Since third party claims are not uncommon, most jurisdictions have laws in place to impose limits on them. These claims are especially common in insurance-related legal cases where parties other than policyholders are held liable in claims.
What Is a Third-Party Claim?
A third party claim refers to a claim made by a defendant during the course of legal proceedings with the intention of enjoining an individual or entity that is not involved in the original action to perform a related duty. One good example of a third party claim is an indemnity claim against a third party. In some situations, third party proceedings are undertaken to determine how negligence should be apportioned between a defendant and a third party.
Besides providing litigation benefit for the defendant who brings in a third party, the final disposition can potentially lead to the formation of res judicata between the defendant and the third party. It is fairly common for a defendant to draw another person into a legal case to share the risk, so many jurisdictions have rules that set forth the limits of third party claims. For instance:
- According to the U.S. Federal Practice Rules, a defendant may serve a summons and complaint as a third-party plaintiff on a nonparty who may be partly or fully liable for the claim against it.
- According to the Conduct of Civil Litigation, a third party proceeding is a cause of action a defendant asserts against a third party that may be independent or dependent upon a cause of action that exists between the plaintiff and the defendant.
First Party and Third Party Insurance Claims
A first-party insurance claim refers to a claim that a policyholder files with an insurance company. Such a claim is contractual by nature and contingent on the insurance policy's specific language.
One example of a first-party insurance claim is a claim made by a homeowner whose home has been damaged in a fire. In this case, the homeowner makes a claim with his or her insurance provider to seek compensation for the damage to his or her home and the repair costs incurred. The compensation that the homeowner will receive from the insurer depends on the type or types of coverage included in the insurance policy. This is why it is essential for homeowners to know exactly what types of losses are covered and not covered by their policies.
A third party insurance claim is a claim made by someone other than the policyholder or the insurance provider. In this case, the insurer may be regarded as the second party. A liability claim is the most common form of a third-party insurance claim.
For instance, if your negligence resulted in an accident on a freeway and caused a passenger in another vehicle to sustain injuries, the injured person has the right to file a claim against your insurer. Since no contract exists between your insurance provider and the injured passenger, the passenger, who is the third party, is entitled to seek compensation for losses that may not be covered by your insurance policy. Some examples of such losses include:
- Medical expenses
- Loss of wages
- Compensation for pain and suffering
It is common for a third-party claim to be called a liability claim because someone other than the policyholder is liable for the losses sustained by the third party. In the event that your insurance company is unwilling or unable to arrive at a settlement< with the third party, the third party may bring the claim to the tort system.
If you are wondering if it is possible for a first-party insurance claimant to file a lawsuit, the answer is “yes.” Although the losses covered by a first-party insurance policy are stated in the contract, an insurance company may not always pay everything it is legally required to. This is called bad faith insurance practice in the insurance industry.
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