Interpretation of First and Third Party Insurance Policies

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Differences between Property and Liability Policies

As the California Supreme Court observed in both Garvey v. State Farm Fire and Casualty Co., 48 Cal. 3d 395, 770 P.2d 704, 257 Cal. Rptr. 292 (Cal. 1989), 48 Cal.3d at p. 399, fn. 2, 257 Cal. Rptr. 292, 770 P. 2d 704, and Prudential-LMI, 51 Cal. 3d at pp. 698-699, 274 Cal. Rptr. 387, 798 P. 2d 1230, a first party insurance policy provides coverage for loss or damage sustained directly by the insured (e.g., life, disability, health, fire, theft, and casualty insurance). A third party liability policy, in contrast, provides coverage for liability of the insured to a third party (e.g., a commercial general liability or CGL policy, a directors’ and officers’ liability policy, a business owners’ policy, or an errors and omissions policy).