The insurance system in USA has numerous sub-categories and liability insurance coverage is a part of it. The main purpose of this coverage is to protect the client (person buying the insurance) from a variety of lawsuits and claims that could be slapped due to certain liabilities for which the client may be held responsible. However, it is imperative that these claims be covered by the policy offered by the insurance company.
Such claims or lawsuits are made by a third party and they are provided with the necessary payment by the insurance company in the case of any unfortunate event. In short, the person who gets the payment is neither the client (insured person) nor anyone from the insurance company. He is an outsider not included in the contract.
It is not only the right of an insurance company but also their duty to defend their clients. They usually use the services of their legal department to do so. All the legal costs involved are borne by the insurance company unless there is a statement in the contract stating otherwise.
There are 3 main forms of Liability Insurance coverage in USA: