Which term describes the state of being bound or obliged in law to do or pay, i.e., a legal responsibility?

• A. Duty
• B. Obligation
• C. Liability
• D. Accountability

Answer: (C)

Liability is the legal responsibility to pay for damages or to fulfill a duty imposed by law. In civil law, liability comes into play when a party’s actions or omissions breach a duty owed to others and cause harm, creating a legal obligation to compensate the injured party. In insurance, this is the core idea behind liability coverage: the insured’s exposure to loss from claims alleging they are legally responsible for someone else’s injury or property damage.

For example, if a driver’s negligence leads to an accident, that driver has liability to the other party for medical costs and property damage. The terms duty, obligation, and accountability relate to responsibilities in a broader sense, but liability specifically denotes a legally enforceable duty that can lead to monetary liability.