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📄 '''Third-party claim''' is a demand for compensation made by someone other than the [[Definition:Policyholder | policyholder]] against the policyholder's [[Definition:Insurance policy | insurance policy]], asserting that the insured is legally responsible for causing the claimant's injury, property damage, or financial loss. This stands in contrast to a [[Definition:First-party claim | first-party claim]], where the policyholder seeks recovery for their own loss directly from their insurer. Third-party claims are the defining mechanism of [[Definition:Liability insurance | liability insurance]] — including [[Definition:General liability insurance | general liability]], [[Definition:Professional liability insurance | professional liability]], [[Definition:Auto insurance | auto liability]], and [[Definition:Workers' compensation insurance | workers' compensation]] — making them central to some of the largest and most complex segments of the insurance market.

⚙️ When a third party files a claim, the insured's [[Definition:Insurance carrier | carrier]] steps into a dual role: investigating the facts and defending the policyholder against the allegation. Under most [[Definition:Liability insurance | liability policies]], the insurer has both the right and the duty to defend, which means it selects and pays for legal counsel, manages litigation strategy, and ultimately decides whether to settle or proceed to trial — all within the [[Definition:Policy limits | policy limits]] and subject to the terms of the [[Definition:Insurance policy | policy]]. [[Definition:Claims adjuster | Claims adjusters]] and litigation managers evaluate [[Definition:Liability | liability]] exposure, assess damages, and negotiate with the claimant or their attorney. The process can span months or years, especially in [[Definition:Bodily injury | bodily injury]] cases involving ongoing medical treatment or disputed causation.

💡 Effective handling of third-party claims is where an insurer's value proposition becomes most tangible to its [[Definition:Policyholder | policyholders]]. A well-managed defense can mean the difference between a dismissed suit and a multi-million-dollar [[Definition:Judgment | judgment]]. For the industry broadly, third-party claim trends drive [[Definition:Loss ratio (L/R) | loss ratio]] performance across liability lines, influence [[Definition:Reserving | reserve]] adequacy, and shape [[Definition:Underwriting | underwriting]] appetite. Rising litigation costs, [[Definition:Social inflation | social inflation]], and expanding theories of liability have made third-party claims increasingly expensive, pushing carriers to invest in early intervention strategies, [[Definition:Alternative dispute resolution (ADR) | alternative dispute resolution]], and predictive [[Definition:Claims analytics | claims analytics]] to control outcomes.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:First-party claim]]
* [[Definition:Liability insurance]]
* [[Definition:Duty to defend]]
* [[Definition:Claims adjuster]]
* [[Definition:Social inflation]]
* [[Definition:Subrogation]]
{{Div col end}}

Definition:Third-party claim - Revision history

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