Homeowner's insurance policies cover legal liability in the event that anyone suffers an injury while on the insured property. Certain actions of the policyholder which occur away from the insured property may also be covered. Even if a house is under construction and has no contents to be protected, the homeowner should obtain liability insurance to protect against claims of workers, and even trespassers.

When a homeowner purchases liability insurance, part of the insurance company's obligation is to provide a defense in the event of a lawsuit. Even though the insurance company selects the lawyer and must approve the payment of all legal fees and other expenses of the lawsuit, the lawyer represents the policyholder. Under most types of liability insurance, the insurance company has the contractual right to settle or defend the case as it sees fit. The homeowner has an opportunity to express opinion, but the company typically has no obligation to obtain the policyholder's consent or approval.

A suit against a homeowner may involve several different claims, some of which may be covered by the liability insurance policy, and others which may not be covered. The insurance company is obligated to provide a defense for any claim, which could be covered, but the company may not be obligated to pay the damages for certain types of claims. Since liability policies typically do not provide coverage for intentional acts, there may be a question as to whether the policyholder acted intentionally. Negligent or accidental acts are generally covered, however, papers filed in court might allege both negligent and intentional actions. In such a situation, the insurance company may send the homeowner a Reservation of Rights letter, a notice that the company is paying for the defense for the claim, but is not agreeing that it is required to pay for any and all losses under the terms of the policy.