In what scenario might an insurance company choose not to pay a liability claim?

An insurance company may choose not to pay a liability claim when the insured will not be held legally liable by a court. Liability insurance is designed to cover claims in situations where the insured is legally responsible for causing harm or damage to another party. If a court determines that the insured is not liable — meaning they did not breach a duty of care that resulted in injury or damage — the insurer has no obligation to pay the claim because the legal basis for liability does not exist.

In other scenarios, such as when a claim exceeds the policy limit, the insurance company is still responsible for paying up to the policy limit, even if it does not cover the entire claim. Additionally, while an injured party's bankruptcy may complicate recovery, it does not directly absolve the insured of liability if they were indeed at fault. The presence of strong evidence from the insured does not negate potential liability either; rather, it may actually support their case in establishing their position. Therefore, the insured's lack of legal liability is the key factor in determining whether an insurance payment will occur.