What distinguishes a first-party claim from a third-party liability claim?

• A. Third-party claims only apply to auto insurance.
• B. First-party is always filed by the insurer; third-party by insured.
• C. The correct description: First-party involves the insured's own property or person; third-party involves liability to others and policy-covered defense/settlement.
• D. First-party claims require litigation; third-party do not.

Answer: (C)

The key idea is who is seeking relief and from which part of the policy. First-party claims are about the insured’s own losses—damaged property or injuries to the insured themselves. The insured files the claim with their own insurer to recover those costs, and the insurer pays or arranges payment for the insured’s damages or medical expenses.

In contrast, a third-party liability claim arises when the insured’s actions caused harm to someone else. That claim is made against the insured’s liability coverage, and the insurer defends the insured in that dispute and pays damages or settlements to the other party, up to the policy limits.

For example, in auto insurance, if your car is damaged in a crash and you need repairs, that’s a first-party claim with your own insurer. If you cause an accident damaging someone else, the other party makes a third-party liability claim against your insurer, which handles defense and any settlement or judgment.

The other statements don’t fit because third-party claims aren’t limited to auto insurance, first-party claims aren’t filed by the insurer (they’re filed by the insured), and neither type uniquely requires litigation, since many claims are settled without going to court.