A type of coverage addresses scenarios where responsibility for damages is assigned regardless of fault or negligence. In these situations, the insured is held liable because of the nature of the activity or the inherent risk involved, not necessarily due to any oversight or error on their part. A business involved in handling explosives, for instance, could be subject to this form of coverage. If an explosion causes damage to neighboring properties, the company could be held responsible, irrespective of whether all safety protocols were followed.
This form of risk mitigation provides a crucial layer of financial protection for businesses operating in potentially hazardous industries. It helps to ensure that victims of accidents receive compensation for their losses, even when establishing negligence is difficult or impossible. Historically, the rise of this type of insurance product has been linked to the growth of industries with significant inherent risks and a corresponding increase in the potential for large-scale damages.