The legal environment enables actions to be brought against individuals and companies from a number of principal sources:
- Tort liability (common law) – a breach of a duty owed to the public or a specific third party (e.g. negligence, nuisance, trespass, libel, slander);
- Statutory liability – responsibilities to third parties created under legislation (e.g. Trade Practices and Fair Trading legislation, Occupiers Liability, Sale of Goods etc.);
- Vicarious liability – assumed because of a relationship with another party (e.g. principal and agent, principal and contractor, employer and employee);
- Strict liability – imposed by either statute or common law precedents;
- Contractual liability – obligations and responsibilities created under contract between two or more parties (e.g. sales contract, building contract).
Due to the diversity and complexity of exposures created from this legal environment, a number of packaged liability insurance products have been developed to respond to the needs of particular organisations, refined over time to respond to legal exposures facing a corporation and people.