eli5: How does it work when a company is sued for millions of dollars? do they actually pay that out in cash/stock/etc..

Question

eli5: How does it work when a company is sued for millions of dollars? do they actually pay that out in cash/stock/etc..

In: 13

Answer 1

In many cases these costs will be met by liability insurers. In the UK, and I think most countries, companies are required to have public liability, employers liability, product liability, and sometimes other kinds, as appropriate. Just like third-party motor insurance, these are intended to make sure people get the compensation they’re entitled to.

The insurer will be involved with – or even run – the defence of the case, and if they lose they’ll pay out the compensation (or at least part of it).