What is the fundamental purpose of casualty (liability) insurance?

Casualty (liability) insurance protects the insured from financial responsibility when they are legally liable for harm to a third party. The insurer pays on behalf of the insured for: damages owed to the third party (settlement or judgment for bodily injury or property damage), defense costs (attorney fees, court costs, expert witnesses), and related expenses. This is distinct from property insurance, which pays the insured for damage to their own property. Casualty insurance includes auto liability, general liability, professional liability, umbrella, and workers compensation. The insured is the 'first party'; the insurer is the 'second party'; the injured claimant is the 'third party' — hence the term 'third-party liability'. Without liability insurance, a single negligence claim can financially ruin an individual or business.