What must be true for coverage to apply under the insuring agreement of a liability insurance policy?

For coverage to apply under the insuring agreement of a liability insurance policy, it is essential that bodily injury or property damage has occurred. This requirement is foundational to liability insurance, as such policies are designed to provide protection against claims arising from injuries to third parties or damage to their property, for which the insured may be held legally responsible.

The presence of either bodily injury or property damage triggers the insurer's obligation to respond to claims under the terms of the policy. It is important to understand that without the occurrence of these events, there is no basis for liability claims, and thus, no coverage can be provided.

Other options are less applicable to the core purpose of liability insurance. While involvement in the damage might factor into the liability determination, active participation by the insured is not a prerequisite for coverage under the policy—the focus is primarily on the occurrence of the specified damages. Furthermore, punitive damages are typically not covered under standard liability insurance policies, which aim to address compensatory claims. Lastly, liability coverage isn't limited strictly to economic losses; it encompasses a wide range of damages, including non-economic damages like pain and suffering, as long as there is an incident that triggers coverage.