What is Commercial Casualty Insurance?

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Casualty insurance is a division of insurance that consists primarily of liability coverages. It is a broad category that includes both commercial and personal coverages. This article focuses on commercial casualty, a category of business insurance.

Commercial Casualty

Commercial casualty generally includes the following types of insurance coverages:

Formerly Included

Some types of insurance were considered casualty coverages in the past but are now classified as property coverages. These include commercial crime, and boiler and machinery coverages.

Crime insurance protects a business against loss or damage to physical property, including money, perpetrated by criminals. Examples of crime insurance are employee theft, and money and securities coverages. Boiler and machinery insurance is now known as equipment breakdown coverage. It provides protection against loss or damage caused by a breakdown of machinery or equipment, such as a refrigerator or boiler.

Includes Some First-Party Coverages

Some types of insurance are considered casualty coverages even though they don't cover third-party liability. An example is commercial auto physical damage insurance. This coverage is actually a type of property insurance. It protects a business against physical damage to autos the business owns.

Auto physical damage insurance is classified as a type of casualty insurance because it is usually provided in combination with commercial auto liability coverage.

There are other types of auto insurance that are considered casualty coverages even though they don't apply to third-party liability. These include uninsured motorist and underinsured motorist coverages. Uninsured motorist (UM) coverage protects your company against auto accidents caused by drivers that have no liability insurance. Underinsured motorist (UIM) coverage protects you when the at-fault driver has some insurance, but the limit is insufficient to cover your losses.

No-fault auto insurance is also classified as a casualty coverage. While no-fault laws generally allow third-party suits under certain circumstances, no-fault benefits (often called personal injury protection) are paid regardless of fault.

Workers compensation insurance also falls under the category of casualty insurance even though it isn't really a liability coverage. It pays benefits to workers injured on the job on a no-fault basis. Injured workers need not file a lawsuit against their employer to obtain workers compensation benefits. Note that most workers compensation policies include employers liability coverage, which does cover third-party liability.

Liability Coverages Classified as Property

A few coverages are not considered casualty insurance even though they cover liability exposures. An example is legal liability insurance, a type of commercial property coverage. This coverage is used to protect tenants against lawsuits filed by landlords due to accidental damage to the leased property. Legal liability coverage has elements of both liability and property insurance. It covers damages for which the insured is legally liable because of direct physical loss to covered property. For the loss to be covered, it must result from damage caused by an accident by a covered cause of loss (peril).

Like a liability policy, legal liability coverage contains a section called Supplementary Payments. This section covers the cost of investigating a claim and defending you against a lawsuit.

Surety Bonds

What about surety? A surety bond doesn't really qualify as either a property or a casualty coverage. Surety bonds are guarantees of performance, not insurance policies. They must be purchased from a surety, not an insurer. Nevertheless, many property casualty insurers offer bonds through subsidiary companies that operate as sureties.