Liability is a term mentioned frequently on television commercials and social media. If you are uncertain about the precise definition of liability, here is a simple explanation.
Definition of Liability
In its most basic sense, the word liability means the state of being held responsible for something. In accounting terms, liability refers to any money owed, such as for accounts payable, employee salaries, or taxes due. In legal terms, liability is the responsibility for wrongdoing, loss, or damage.
When individuals or organizations cause harm but do not break the law, they can be held civilly liable. Examples of actions that fall into this category are accidents, unintentional negligence, and product liability claims.
When people’s actions break the law, they are held criminally, as well as civilly, liable. In these cases, the defendant risks fines or imprisonment. Examples of criminal liability are fraud and theft when a defendant commits them with the intent to commit a crime.
Public liability insurance protects an organization from injuries that might occur to the general public while they are on the premises and is considered the minimum amount of insurance a business needs. General liability coverage is much broader, encompassing a wider range of potential damages and injuries.