1. Third-party liability exists if an entity (not connected with the employer) is the cause and is liable to pay the medical cost for injury, disease, or disability of a person hurt during the performance of his or her occupation and the injury is caused by an entity not connected with the employer. 2. Entity that is responsible for the cost of an illness or injury (e.g., automobile, homeowner insurer). Also referred to as third-party payer liable .