Liability Insurance


Liability insurance protects you against civil liability claims, in other words, in situations where you could be held responsible for your actions. It’s sometimes referred to as “civil liability insurance” or “individual insurance.”

Liability insurance provides two types of protection:

  • If someone takes you to court: by helping to defend you, which means paying your legal costs, including lawyer’s fees.
  • If a court finds you responsible: by paying compensation (on your behalf) to the person who suffered from the consequences of your faults or your omissions.

Your insurance contract

Your insurance contract sets out the various situations that are covered as well as situations that aren’t. Situations that aren’t covered by your insurance contract are called exclusions.

Did you know?

Your home insurance policy usually includes lability insurance.

In addition, your car insurance is required to include a specific type of liability insurance, which covers damage and injury you cause to other people and vehicles with your car.

What you must tell your insurer

Before entering into your liability insurance contract, you must give your insurer all relevant information that can impact the amount of the premiums you’ll have to pay and its decision whether to insure you.

You must answer your insurer’s questions to the best of your knowledge.

Examples of what you must tell your insurer:

  • Whether you have a dog (you’re responsible if it bites someone).
  • Whether there’s a possibility that someone might sue you (for example, you caused damage to a person but you don’t know yet if they intend to claim compensation from you).
  • Past events that can have an impact on the insurance (for example, if you’ve been sued several times over the past few years).    

Beware of making false statements

If you make false statements, your insurer can refuse to defend you in court and compensate the person who suffered damage as a result of your fault. To do this, the insurer must show that

  • you intentionally provided false information, or
  • the insurer would have refused to insure you if you had provided the correct information.

If your insurer can’t prove either of these things but you did give false information, the amount the insurer must pay out will be less than if you had provided correct information.  

When coverage begins

Your liability insurance coverage begins once the insurer agrees to insure you, or on another date you arrange with your insurer.  

This date is indicated in your insurance policy. Your insurance policy is a written document that proves you have an insurance contract and sets out the main points of the contract.

Paying for liability insurance

The payments you’re required to make to your insurer in return for coverage are called “premiums.”

You must pay the premiums when indicated in the insurance contract.

If you don’t pay one of your premiums, the insurer can

  • cancel your insurance contract,
  • take steps to get you to pay the premium (demand letter and court proceedings, if necessary), or
  • deduct the amount of the premium from any indemnity it owes you.

At the end of the insurance contract, your insurer must refund any extra premium amounts that you have paid.

Notify the insurer if the risk increases

You must notify your insurer as soon as possible about any situation that meets the following three conditions:

  • The situation has increased the risk of your causing damage to other people.
  • The situation has an important impact on how the insurer sets the amount of the premium, evaluates the level of risk or decides whether to continue insuring you.
  • You’re the cause of the situation.

For example, several insurers consider that owning a dangerous-breed dog meets these three conditions and require that you advise them if you get one. 

Once you inform the insurer of a situation that increases the risk, it has a few options. It can

  • adjust the premium, or
  • cancel your insurance contract.

If the insurer chooses to adjust the premium, you have 30 days to accept it and pay the new premium. If you don’t accept it or if you don’t pay the new premium within 30 days, you will no longer be insured.

If you don’t notify your insurer of a situation that increases your risk of causing harm to other people, the consequences are the same as if you had made a false statement. 

End of coverage 

Your insurer can cancel your insurance coverage at any time by letting you know 15 days in advance.   

You can also cancel your insurance by giving the insurer written notice. Your coverage will end as soon as the insurer receives your notice.

When someone claims you’re responsible 

You must notify your insurer when an event occurs that you are or could be held responsible for. Your insurer can then determine if it must take action to defend you or learn more about your situation. Another possibility is that your insurance doesn’t cover this situation.

Notifying your insurer

You must notify your insurer when an event occurs for which you could be held responsible.

  • It’s important to do this as soon as possible, even if you’re not sure whether the situation is covered by your insurance contract.
  • You can notify your insurer in writing (by email, through the insurer’s mobile app, etc.) or verbally (for example, by telephone).

Once the insurer has been notified of the situation, it can ask you to provide more information about what happened. It can also ask you to provide documents. You must respond to its requests as quickly as possible and as best you can.

If you don’t notify your insurer of the event, or if you wait too long, it can refuse to defend you and pay for the damage caused if the following two conditions are met:

  • Your actions caused harm to the insurer. For example, the insurer didn’t have an opportunity to send an expert to the location to assess the extent of the damage and determine each person’s responsibility.  
  • Your insurance contract clearly states that your insurer can refuse to defend you and pay for the damage caused in this type of situation. 

If someone takes you to court

Your insurer must defend you if someone takes you to court and the situation is covered by your liability insurance contract. The insurer must pay for your lawyer’s fees and all other court costs.

If the court holds you responsible for the damage, your insurer must pay the money directly to the person who sued you.

However, if the amount of the damage you caused is higher than the limit provided in your insurance contract, you’ll have to pay the difference yourself. For example, if you’re insured for $1,000,000 and you cause an accident resulting in $1,300,000 in damage, you must pay $300,000. However, your insurer must pay the lawyer’s fees, court costs and interest in full, regardless of the amount you’re insured for.

Situations where the insurer can refuse to pay

In some situations, your insurer can refuse to defend you and pay for the damage you caused. Here are some examples of when it can refuse 

  • The situation that resulted in a person claiming compensation from you isn’t covered by your liability insurance. It’s therefore part of your contract’s exclusions.
  • You intentionally caused the event that resulted in the damage.
  • You intentionally made a false statement to your insurer about the circumstances of a situation involving your responsibility. For example, you hid certain details.
  • You signed a settlement agreement with the person who is suing you, without your insurer’s authorization.
  • Insurance policy: A written document showing that an insurance contract exists and setting out its main points.
  • Premiums: Amounts of money you pay to the insurer in return for insurance coverage.
  • Rider: A document you sign to modify or add an item to your insurance contract.
  • Loss: The situation that occurs when you’re held responsible or could be held responsible for your actions and your insurer must become involved.