Third Party Liability: Protection and Prevention – a Powerful Combination

Your business owner clients are no strangers to risk. Every day, they do their best to minimize their business risks – small and large – but a risk they might NOT be fully informed about is Third Party Liability.


Third Party Liability is not provided in a general liability policy or a standard Employment Practices Liability Insurance (EPLI) policy. 


An insured must purchase an EPLI policy that includes Third Party Liability.


It’s important for you to explain to your clients how they can protect themselves with the right coverage – as well as prevent possible risks through the right workplace activities.

Protection: What Does Third Party Liability Cover?


Third Party Liability protects a client’s business when a third party holds them responsible for damages.


The coverage pays for legal fees, medical bills, or possibly the cost to replace damaged property owned by the third party. Third Party Liability extends EPLI coverage to non-employees and anyone not directly involved in a client’s business.


Examples include customers, visitors, suppliers, and contractors. Good EPLI policies will include a broad definition of Third Party Liability that includes harassment and discrimination.  


There are many types of third-party claims that can be brought against the Insured. An employee may claim they have been harassed or discriminated against by a third party, or a third party may claim the same about an employee.


A customer may injure themselves on-site – or their property may be damaged as a result of services provided by the business.


Without Third Party Liability coverage, your clients would need to pay these claims out of pocket.


Prevention: Building a Workplace Culture to Minimize Risks

Any employer should be taking steps to avoid third-party claims – because even with the right coverage, the process for each incident can be time consuming and stressful.


Here are some helpful tips to share with your business owner clients:


  • Have a handbook in place with written policies, including harassment and discrimination. Ensure the handbook is visible (and regularly promoted) to employees. The handbook should include information about how to report third-party claims. (Some EPLI carriers will not approve coverage if these policies and procedures are not in place.)

  • Conduct regular training for employees that covers the policies in the handbook. All new employees should undergo this training immediately.

  • Maintain a rigorous process for selecting third-party contractors and vendors. Consider extending training sessions to include them.

  • Build a rigorous safety culture to avoid potential incidents.


Not only can these due diligence activities help minimize risk, but they are also – quite simply – the right thing to do.


By keeping up with this critical due diligence – and by having the right insurance to protect against unpredictable risks – your clients can focus on their top priority: running their business!


Interested in more tips or have a question about Third Party Liability coverage? The Rockwood team is here to help.


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Meghan Bell is currently a Senior Underwriter at Rockwood, and is responsible for the Employment Practices Liability Insurance (EPLI) program. Ms. Bell has over fifteen years’ experience working with this particular product.

She has been a Rockwood employee since 1998.