1.1 - Intro to Liability Insurance Flashcards
Liability Explained
-nearly all liability policies include the words “Liability imposed by Law” or “may become legally obligated to pay” in the insuring clause
liability refers to responsibility assessed against a person or an entity (ex. a company) for injury or damage to a third party as a result of applying the law
-accounting point of view - liability represents “money owed” or a “debt”
-the liability insurance policy contemplates that when liability is imposed according to the laws of the land, a financial obligation - money owed to an injured TP - will be assessed against the person who was responsible for the injury or damage
-for insurance purposes, liability equates with responsibility: the responsibility that falls upon persons because of their actions or inaction or arising from their ownership, control, use or operation of something
-the categories of nuisance and negligent acts qualify as torts. When someone intends to injure someone else in a way that the law forbids, it is classified as an intentional tort
Negligence
> Definition -> Failure to use the degree of care expected from a reasonable and prudent person
-the most common way the law imposes liability is finding that someone has committed a TORT (a wrongful act) due to NEGLIGENCE that results in damage or injury to another
-negligence is doing something a reasonable and prudent person would not do or failing to do something that a reasonable person would do
-common sense should govern people’s conduct so that they do not do anything that could foreseeably cause damage or injury to others
Definition - “Tort”
A legal wrong arising from a duty fixed by law. A breach of this duty that causes injury to persons or property is repressible by legal action for damages. Liability for tort involves a private or civil wrong or injury and is distinct from that under contract in that the duty is owed to people, generally, rather than to a specific individual
Nuisance
> Definition -> In law, a class of wrong that arises out of unreasonable, unwarranted, or unlawful use by a person of his or her own property, whether that property be real or personal or from his or her own improper, indecent, or unlawful personal conduct and producing an annoyance, inconvenience, discomfort, or hurt to others or to their property that the law would presume a consequential damage. In insurance claims, it is most frequently met as a cause of action, arising from the escape of some obnoxious substance
-when someone infringes on a person’s right to enjoy and use his or her property, it might qualify as nuisance if there is a substantial and unreasonable interference with these rights
-In Quebec, neighbours are not required to endure excessive neighbourhood disturbances or annoyances
2 Types of Nuisance
-In common law, nuisance can be broadly divided into two torts - private and public
>Definitions -> Private nuisance = An unlawful interference of a person’s enjoyment and use of his or her land
>Definitions -> Public Nuisance = An action or a thing that interferes with the general public. It interferes with the public as a class, not merely with one person or a group of citizens
-private nuisance is interference with a person’s use and enjoyment of his or her living area, and public nuisance is interference involving the rights of many people
-only the Attorney General, the official representative of the public, may bring an action for public nuisance
-examples of nuisance include noise, vibrations, and noxious odours
-claims in nuisance are not as common as claims in negligence
Breach of Contract
-in general terms, when a party to a contract fails to honour its terms, that party is said to be in breach of contract
-breach of contract provides the injured party to the contract with a legal cause of action against the party who failed to perform
-the most important factor in someone being in breach of contract is that it has to be a fundamental and important part of the contract
-the protection offered in a liability insurance policy has a limited application to breach of contract
-contractual liability under the typical general liability policy covers liability assumed by contract when one party promises to indemnify or hold harmless another when liability is imposed by law for a tort.
-but a liability policy does not cover damages imposed on one party for failing to perform its obligations to the other party as laid out in the contract
Definition - “Contractual Liability”
-liability assumed through a contract, either written or implied. Legal liability policies are based on liability in tort or negligence and provide limited coverage for contractual liability. However, contractual liability may be covered in many instances as an additional risk with an additional premium
Definition - “Hold harmless and indemnity provisions”
-a contractual agreement whereby one party assumes the liability and risk of another party and indemnifies the other party from having to bear the loss
Jurisdiction
-a breach of law in one jurisdiction may not be one in another; similarly, there may be different laws between provinces and territories
-each jurisdiction sets its own standards that modify rules to accommodate the needs of the community
-knowledge of the statute law from one area to another is often very important to determine whether a wrongful act has occurred
-example of statute law includes the “Occupiers Liability Act”, “Highway Traffic Act”, or “Safety Act” found in each province and territory
-the greatest differences exist between Quebec and the common law provinces
-although similar to common law in outlook and most end results, the “Civil Code of Quebec” has codified the many legal situations that are still part of case law precedent in the common law system
Definition - “Statute Law”
a law set down in a government act and passed by legislature
Criminal Law Vs Civil law
-“The Criminal Code of Canada” includes a list of acts that qualify as crimes that will be punished by society
-The criminal code and other legislation (including Provincial and territorial statutes) specify the duties an individual owes to society as a whole.
-for example, legislation governing highways and motor vehicles sets speed limits and makes it an offence to exceed them. Speeding is not a crime because it is not prohibited by the Criminal Code of Canada, but it is an offence. Offences of this type are often referred to as quasi-crimes
-a Civil action (lawsuit) arises from a dispute, formally brought before a court, between individuals or corporations where the injured party is usually interested in monetary compensation.
-it could involve individual rights, family relationships, estates, contracts, and in fact any dispute not involving a criminal or quasi-criminal act.
-but someone who commits a criminal or quasi-criminal act can also be sued in civil law for any damages caused as a result of the breach of duty to an individual
-whereas criminal law seeks to determine guilt, civil law provides judicial forum to assign fault by developing and interpreting common law principals and applying relevant statute law
-the Criminal court seeks to punish an offender by imprisonment or fine or some other appropriate method, whereas the Civil court is concerned with setting appropriate compensation for the damages suffered and then obliging the liable party to pay this sum to the injured party
-in other words, a breach of criminal law demands punishment; a breach of civil law demands compensation
Two Systems of Civil Law - 1. “Civil Code of Quebec”
-the Civil code of Quebec evolved from the time when Quebec was a French colony
-it covers every area of law from birth certificates to insurance contracts, from corporations to mandators, from mortgages to wills.
-the court’s role is to settle disputes according to the specifications set out in the Code; its role is not to make the law but to interpret it
-if the code does not cover the material facts specific to the given situation, the courts will apply the general principals of justice set out in the Code.
>civil litigations = Articles 1457 - 1481
>governing insurance = Articles 2389 - 2414
>Damage insurance - common provisions that apply to property and liability insurance = Articles 2463-2479
>specifically deals with liability insurance = Articles 2498-2504
Two Systems of Civil Law - 2. “Common Law system”
-over the years Canada’s common law system has evolved into a mix of both case law precedent and statute law
-Parliament and provincial and territorial legislatures have passed laws into written form know as statute law - has been derived, in some cases from legal principles and criteria developed by the common law
-for example, most provinces and territories have passed legislation to govern occupier’s liability codifying standards of behaviours and defining responsibilities related to premises liability
-in some cases statute law is enacted as a response to the rapidly changing society, such as laws enacted to deal with the environment to define duties and responsibilities over concerns with pollution
-statues laws supersede case law precedent when one comes into conflict with the other - if the statute specifically covers the point in dispute
-in the common law provinces and territories, courts are bound to follow prior or past precedents
Definition - “Common Law”
-a system of laws originating and developed in England by judges based on court decisions and similar tribunals. Also known as case law or the law of precedent
Case Law Precedent
-under common law, the courts look upon cases that have already been decided for guidance on how to resolve cases currently in dispute
-precedent-setting case law forms a body of general principles that that can be compared to the case in dispute
-to apply the common law theories, lawyers and judges are often required to conduct a great deal of research to determine which cases can be used as a basis for reaching a decision
-cases may be similar in circumstances or they may have settled a particular principle of law
-an analysis is conducted to justify and support the decision to be taken
-these past court decisions are considered to have set a precedent when they direct the outcome of other disputes that follow
-case law is not of itself a branch of law, it is merely the recording (in writing) of decisions made in court
-if a precedent has not been set for the particular case under consideration, the court may include in its judgement a set of rules with attendant criteria in a logical argument in support of its decision
-this process of developing sound and fair legal principles within case law is referred to as “creating precedent”
-when such a decision eventually influences the outcome of future cases, it is considered to be precedent-setting case law
-a certain hierarchy is followed to apply the law of precedent - if more than 1 judgement is found with a similar fact situation, the court will follow the precedent set by the higher court; Supreme Court of Canada decisions supersede any provincial or territorial court decisions, and decisions from a Prov. or Terr. Superior court supersede decisions of lower courts of that prov. or terr.
-decisions from prov. and terr. other than the one where the incident took place can be considered; however, they do not have as much influence as local decisions
-the court may differentiate a current case from a precedent-setting case in the course of its analysis
-any distinguishing characteristics provide the court with latitude to dissociate its decision from precedents already set by a higher court
-in practice both the Civil code of Quebec and the common law system rely heavily on the body of case law that has developed within their jurisdiction
-in theory, common law courts are bound to follow precedent from higher courts
-although Quebec courts are not bound by prior rulings or decisions, they tend to be effectively persuaded when arguments are supported by case law
Court structure
-the structure of the court system varies with each prov. and terr. in Canada
-at the lowest level are the small claims courts or divisions for small cases, then the county or district courts for intermediate lawsuits, and the highest level is the superior court for the largest legal cases
-there is a final means of recourse in the prov./terr. appeals court
-in many jurisdictions, there is no right of appeal from cases heard in small claims court or division
->Supreme Court of Canada ->Court Martial Appeal Court ->Federal Court of Appeal
->Federal court ->Tax Court
->Prov./Terr. Courts of Appeal
->Prov./Terr. Superior Court
->District/County/Divisional Courts (right of appeal depends on jurisd.)
->Small Claims Courts or Divisions (right of appeal depends on jurisd.)
-the highest court in Canada is the Supreme Court of Canada
-the Supreme Court of Canada does not hold trials, but hears appeals from all other Canadian Appeal courts. It is here where precedent-setting cases are heard and laws may be changed based on its ruling
-until 2003, the Federal Court of Canada consisted of 2 divisions: an appeal division and a trial division. With amendments to the Federal Courts Act coming into force on Jul 2, 2003, these divisions became 2 separate courts: the Federal Court of Appeal and the Federal Court
-the federal court system deals with intellectual property, federal taxes, marine (or admiralty law) and other similar categories that are part of the federal domain
-all appeal cases from the prov./terr. court systems do not automatically qualify to be heard at this level, this court must consent to hear them. Generally cases are selected on the basis of their national importance or to establish a precedent on some point of law
Insurance professionals and the Legal system
-an insurance policy is a contract - a kind of legal document
-insurance professionals must therefore understand the 2 systems of civil law in Canada that create and enforce the right and duties of insurance professionals, the insureds they serve, and the public at large
-insurance professionals must also continually expand their knowledge of the law and keep apprised of changes in laws and regulations, along with societal trends that influence the insurance transaction (eg. changes to Cannabis regulations)
-the legalization of recreational cannabis added further considerations for the insurance professional concerning general liability or D&O liability insurance. Such policies often exclude loss or damage arising from a criminal act, which would have included any activity involving cannabis, but now after legalization, an insurer’s response to claims arising from such activity has to become more nuanced
Definition - “Directors and officers (D&O) Liability Insurance”
-Protection for officers and directors of a corporation against damages resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured. Also called D&O liability insurance
