1-K Liability Insurance and Policy Limits

Question 1

Liability insurance is designed to cover a ____ party who has been damaged by a policyholder.

Answer 1

3rd

Question 2

___________- obligated according to law or equity; responsible

Answer 2

Liable

Question 3

_____________________- insurance that protects the policyholder against any damage or injuries he may cause to another party.

Answer 3

Liability insurance

Question 4

T or F
Liability insurance always indemnifies a 3rd party, never the insured.

Answer 4

True

Question 5

Legal liability can be determined outside of ___________.

Answer 5

court

Question 6

Who does liability insurance cover?

Answer 6

1. Named insured; owner of the car
2. Insured; someone who uses the car with owner’s permission

Question 7

Negligence- failure to use a ___________ degree of care in a particular situation; includes both wrongful acts and acts of omission.

Answer 7

reasonable

Question 8

T or F
Liability insurance sometimes covers intentional acts of wrongdoing on the part of the insured.

Answer 8

False

Question 9

_______________ liability- the transfer of negligence from one party to another (often applies to employers and parents)

Answer 9

Vicarious

Question 10

4 elements of negligence

Answer 10

1. Defendant had a legal duty to act in a prescribed manner
2. Defendant failed to act accordingly (called breach of duty)
3. Plaintiff suffered actual loss or injury due to defendant’s action/inaction
4. Loss/injury to plaintiff was a direct result of the breach of duty by defendant

Question 11

3 Degrees of liability

Answer 11

1. Full liability-100%
2. Partial liability-3rd party shares fault
3. No liability- 0%

Question 12

Defenses to a Claim of Negligence

Answer 12

1. Assumption of risk
2. Contributory negligence
3. Comparative negligence

Question 13

Assumption of risk- claimant knew he had ____________ to experience damage or injury

Answer 13

potential

Question 14

Contributory negligence- “If you hadn’t played your part in the negligence, you would not have experienced any damages. Therefore, you receive no ____________.”

Answer 14

indemnification

Question 15

Comparative negligence- adjuster seeks to suggest a percentage of ____________.
Ex. 75% claimant responsible, 25% policyholder responsible

Answer 15

responsibility

Question 16

Modified comparative negligence- same as comparative negligence, except that plaintiff receives no ____________ if found to be 50% or more at fault. ie. Some states require 51% or more

Answer 16

damages

Question 17

Res Ipsa Loquitur- “the thing speaks for itself”
Circumstances of the injury make it ___________ that the defendant is negligent; no proof is needed

Answer 17

obvious

Question 18

_______________ (Absolute) Liability- holds a party 100% liable for damages when the activity or instrument they are performing is inherently dangerous.

Answer 18

Strict

Question 19

Dangerous Instrumentality Doctrine- holds a party strictly liable for damages caused during inherently ___________________________________. a.k.a. Inherently Dangerous Activity

Answer 19

dangerous activity

Question 20

Policy Limit- ______________amount a policy will pay for covered losses

Answer 20

maximum

Question 21

Single limit liability insurance- establishes one maximum ____________ for liability damages caused by policyholder; limit applies for each occurrence

Answer 21

payout

Question 22

Split limit liability insurance- establishes ___ different limits on how much the policy will pay out. Limit 1 is max payout for bodily injury for each person injured; Limit 2 is max payout for bodily injuries to multiple persons; Limit 3 is max payout for property damage.

Answer 22

3
Typically written in format 50/100/50 meaning $50k/$100k/$50k

Question 23

Aggregate limit liability insurance- typically found in ____________ liability policies.

Answer 23

commercial

Question 24

Aggregate establishes two liability limits:

Answer 24

1. Limit 1- max payout for damage or injury per occurrence
2. Limit 2- max amount policy will pay per term
   EX. $500,000/$1,000,000