What is a Third-Party Claim?

A Third-Party Claim is a liability claim filed against your restaurant by someone outside your business—such as a customer, vendor, visitor, or neighboring property owner—seeking compensation for injuries or damages they suffered due to your operations.

What You Need to Know

Third-party claims are what liability insurance is designed to cover. When a customer slips and falls in your restaurant, gets food poisoning from your food, or is injured by your employee’s actions, they file a third-party claim against you. You’re the first party (the insured), your insurance company is the second party, and the injured person or their lawyer is the third party making the claim.

These claims are handled by your liability insurance company—they provide legal defense, investigate the claim, negotiate settlements, and pay judgments up to your policy limits. You must report third-party claims immediately and cooperate with your insurer’s investigation, but they control the defense and settlement process.

Why It Matters for Restaurant Owners

Understanding third-party claims helps you grasp why liability insurance limits matter so much. Unlike first-party property claims where you know your maximum exposure (the value of your property), third-party liability claims have no natural cap—courts can award whatever they determine is appropriate compensation.

A single serious food poisoning outbreak could generate dozens of third-party claims totaling millions of dollars. A fatal drunk driving accident after over-serving alcohol can result in $1M+ judgments. Your liability insurance limits are your only protection besides personal assets.

Report all incidents immediately even if no claim has been filed yet—customers often file claims weeks or months after incidents. Never admit fault, promise payment, or negotiate with claimants directly without involving your insurer first.

Document everything about incidents because these details become crucial when defending third-party claims months or years later. Your insurer has extensive experience handling these claims—trust their expertise and cooperate fully with their investigation and defense.