What does Third Party/First Party mean?

First Party refers to a situation where the insured has an issue directly with his own insurer. They have a contractual relationship through the policy and an issue that arises between them. “First Party Litigation” is where an insurer sues his own insurance company directly. For example, if the insured makes a claim for damage to his home under his homeowner’s policy, and the carrier denies the claim, then the insured filing of a suit against the carrier is First Party Litigation.

Third Party refers to a situation where a third party makes a liability claim against an insured. For example, Mr. X slips and falls at a store. Mr. X makes a liability claim against the store owner for injuries. The store owner has a commercial policy that may defend and indemnify him from the claim or ensuing lawsuit. This is Third Party Litigation.