Liability to others is your responsibility for creating damage or injury to property or persons by your actions. A liability insurance policy will pay on your behalf those amounts that you are found legally liable to pay. When you purchase a liability policy you are buying your defense to a lawsuit. The insurance company will appoint a law firm to represent and defend you against liability lawsuits.
Say you are riding close to pedestrians on a crowded street and someone steps into your path and is injured by your bicycle and they claim it was your fault they are injured. After the police report they know your address and a month later you receive a demand letter from the pedestrian’s attorney. What do you do?
If you own an insurance policy that includes personal liability you simply give the attorney letter to your insurance company and initiate a claim so the insurance company attorneys can defend you. Typically a renter’s or home insurance policy will include a personal liability limit.
Without any policy to defend you there are 2 options and neither one is great. First, you can ignore the pedestrian’s attorney in which case you might end up with a default judgement against you or you can retain your own attorney who will cost in excess of $250 per hour and will expect a hefty retainer to look into your case.
It might cost less to make an offer to the pedestrian’s attorney even though you believe the accident was not your fault. This is called an economic settlement where the cost to defend will most likely exceed the plaintiff’s demand.
In the absence of any other liability insurance to protect you there are bicycle liability insurance policies that offer an optional bicyclist liability protection endorsement. Whatever your situation you should make sure that you are protected by a liability policy because you never know when an accident can happen and you don’t have to be wrong to be sued for your actions.