Third Party Liability refers to the legal responsibility one party has to compensate another party for damages or injuries caused by their actions. This concept is commonly seen in insurance policies, where an individual or business may be required to cover costs related to accidents or damages that affect others, not just themselves. For example, if a driver causes a car accident that injures another person, the driver may be held liable for the medical expenses and damages incurred by the injured party. This ensures that victims can receive compensation for their losses, promoting accountability and safety in various activities.