Claims & Disputes

Third-Party Claim

Third-party claims are made by injured parties or those who suffered a loss caused by the policyholder, seeking compensation from the at-fault party's liability insurer.

Last reviewed: May 2026 · Editorial methodology

Definition

A third-party claim is an insurance claim filed by a person or entity (the claimant) who is not the named insured or a party to the insurance contract, against the liability insurance policy of the party responsible for their loss. Common examples include: a driver injured in an accident filing a claim against the at-fault driver's auto liability insurer, or a customer injured on business premises filing against the business's general liability policy. In third-party claims, the insurer's primary contractual duty is to its policyholder—but the insurer must still handle the third party's claim in good faith and in compliance with unfair claims settlement practices laws. Third-party bad faith arises most commonly when an insurer fails to settle a liability claim within policy limits when it had a reasonable opportunity to do so, exposing its policyholder to excess judgment. The distinction between first-party and third-party claims is legally significant: subrogation rights, statutory deadlines, and the duty to defend all differ by claim type. Most states require insurers to acknowledge third-party claims within 10–15 days and conduct reasonable investigations.

Where this term matters

Claims Help Center →/claims/auto-insurance-claim →/claims/bad-faith-insurance →

Tip

Glossary definitions are educational. Always check your own policy language — insurers can define common terms differently from one another. When in doubt, request a written explanation from your agent.

Related terms

First-Party ClaimFirst-party claims involve the insured seeking compensation from their own insurer for covered losses—such as a homeowner claiming for storm damage or an auto owner claiming for a collision under their own policy.SubrogationYour insurer's right to recover claim payments from the third party that caused the loss.Bad Faith InsuranceInsurance bad faith occurs when a carrier fails to investigate promptly, unreasonably delays or denies a valid claim, or fails to communicate claim decisions—potentially exposing the insurer to damages beyond the policy limits.AdjusterA licensed professional who investigates and settles insurance claims for the insurer or for the policyholder.
Source: Cover Forge USA editorial team|Last verified: May 2026|Methodology
Definitions are educational and may be simplified. Always refer to your policy contract and consult a licensed agent for terms that affect coverage decisions.
CF

Cover Forge USA Editorial Team

Editorial Lead

This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.

Reviewed June 2026

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