Civil Claims

Civil Claims – Non-Criminal Legal Actions Explained

Have you ever wondered how the term "civil" fits into the context of an insurance agency? It's not a matter of common courtesy, but refers to non-criminal legal claims. Ignorance of civil claims could be a critical gap in your coverage.

TL;DR

A civil claim is a non-criminal legal action where one party seeks compensation from another.

Understanding civil claims is vital for effective risk and insurance management.

A common pitfall is misunderstanding civil claims as criminal actions.

A best practice for agencies is to educate clients about civil claims and their potential financial impacts.

What Is Civil in Insurance?

From a client’s point of view, a civil claim is when they seek compensation from another party for an issue like an injury, property damage, or a contract dispute. It doesn't involve the police, but lawyers and potentially a court judgment.

From a technical insurance perspective, a civil claim often arises when a liability policy triggers. This includes parts of the policy like liability limits, exclusions, deductibles, and conditions. The policy might may mention tort or legal obligation, which are other types of civil claims.

Key Related Terms to Know

Litigation - The process of taking a civil case through the court system.

Liability - The legal responsibility for one's actions, often associated with the duty to compensate for damages.

Indemnification - The insurer's obligation to restore the client to the financial position they were in before a loss, subject to policy limits and conditions.

Negligence - Failure to use reasonable care, resulting in damage or injury to another.

Tort - A civil wrong causing someone to suffer loss or harm, leading to legal liability.

Common Questions About Civil

What's the difference between a civil and criminal case?

A civil case usually involves private disputes between individuals or organizations. The person or entity initiating the case, known as the plaintiff, seeks a remedy usually in the form of monetary damages.

However, a criminal case involves offenses against the society, state, or public, even if it involves an individual victim. The cases are initiated by a government prosecutor.

How does a civil lawsuit affect an insurance policy?

A civil lawsuit pertains to a claim against an insured, and the liability portion of the client's insurance policy often responds to it. For instance, in an auto policy, the bodily injury liability coverage would pay up to the policy limit if the insured is held responsible for causing bodily injury in an accident, and a civil lawsuit is filed for it.

Are all civil cases insurable?

Not all civil cases are insurable. Intentional wrongful acts, for example, are generally excluded in liability policies.

What is the agency's role in a client's civil case?

An agency's role is providing the right protection for clients, educating them on potential risks, and guiding them through claims. However, they do not act as the client's lawyer or insurer. After a loss, the agency assists in facilitating the claims process with the insurer.

Civil vs. Criminal

Comparison Area	Civil	Criminal
Primary usage	Legal disputes between private parties, organizations	Violations of penal law, prosecuted by the state
Coverage / Concept type	Typically covered under liability insurance	Not typically covered under personal or commercial lines insurance
Typical exclusions	Intentional acts, contractual liabilities not assumed in the course of an insured's business	Willful and malicious acts
Who is most affected by errors	Insureds, claimants, insurers	Society at large, individual victims
Common mistakes	Incorrectly understanding exclusions, limits	Believing insurance covers criminal fines or restitution

Real Claim Examples Involving Civil

Scenario 1: A client's dog bit a visitor, causing injury. The injured party filed a civil lawsuit seeking compensation for medical expenses. The client's homeowners policy covered the claim under personal liability coverage.

Scenario 2: A client's advertising unintentionally infringed on another business's trademark. The aggrieved party filed a civil lawsuit. Fortunately, the client's commercial liability policy included personal and advertising injury coverage.

Scenario 3: A former employee sued the client for wrongful termination—a civil claim. Unfortunately, the client's general liability policy didn't cover employment practices liability—the employer liability was exposed.

Limitations and Common Mistakes

Civil claims coverage varies widely based on the policy form.

Confusing civil, criminal, and administrative proceedings—it's critical to differentiate them.

Assuming all civil claims are covered under standard liability insurance.

Failing to explain potential areas of loss exposure not covered by insurance.

Not engaging adequate legal support when needed.

How to Explain Civil to Clients

To a Personal Lines client: "Civil claims relate to disputes among individuals or businesses serviced through court actions. If someone slips on your icy driveway, that's a civil claim, not a criminal offense."

To a Small Business owner: "Civil claims are when someone, possibly a customer or another business, takes you to court to seek financial compensation. If a customer falls and gets hurt at your location, they may file a civil claim, each handled by your business liability policy."

To a CFO or Risk Manager: "Managing the risk of civil claims is crucial. They are lawsuits brought by individuals or businesses against your company seeking monetary damages. It's vital to have robust liability coverage to protect your firm's assets and reputation."