A restaurant's own kitchen equipment burns for a $60,000 loss and, in a separate incident, a diner sues the restaurant for $80,000 over food poisoning. Which statement classifies these two claims correctly?
Explanation
A first-party claim is made by the insured against their own insurer for the insured's own loss, which is what the burned kitchen equipment is. A third-party claim is brought by someone outside the contract against the insured, which the diner's food-poisoning suit is, and it is the liability policy that supplies defence and indemnity. Reversing the two is the common error: the identity of the claimant, not the size of the loss, decides which it is.
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