Basics of Casualty Insurance

Question 1

Note
Property—covers personal belongings and real property
• Example: If my house burns down, insurance pays me to rebuild.
Casualty—pays the “other guy”
• Example: If the mailman gets bit by my dog, my insurance
company pays the mailman to pay for his medical claims due to my negligence.

Answer 1

Property—covers personal belongings and real property
• Example: If my house burns down, insurance pays me to rebuild.
Casualty—pays the “other guy”
• Example: If the mailman gets bit by my dog, my insurance
company pays the mailman to pay for his medical claims due to my negligence.

Question 2

____occur when a person claims to have been injured by an insured, or when a person’s property has been damaged by the insured’s actions.

Answer 2

Third-party Losses

Question 3

A___is a civil wrong that unfairly causes someone else to suffer loss or harm resulting in legal liability for the person who commits the tortious act. Liability insurance provides coverage for unintentional ___involving negligence.

Answer 3

Tort

Question 4

___is failure to exercise the care that a reasonable person would exercise in like circumstances

Answer 4

Negligence

Question 5

Elements of Negligence

Answer 5

• Owe a duty
• Breach the duty
• Be the proximate cause
• Damages
• A drunk driver is guilty of a crime but is not guilty of negligence unless it causes harm to another

Question 6

A ____doctrine says that if a person contributed to his/her own damages in any way, another party cannot be held liable for the damages.

Answer 6

contributory negligence

Question 7

_____or reduces the right of recovery against a negligent third party when he voluntarily and knowingly participated in the dangerous activity that caused his own injury.

Answer 7

Assumption of risk bars

Question 8

_____is when an independent event affects the chain of events. It may also serve as a defense against liability.

Answer 8

Intervening Cause

Question 9

____laws provide that certain types of lawsuits must be filed within a specified time of the occurrence to be valid under the law.

Answer 9

Statutes of limitations

Question 10

The____ is a doctrine that is employed in contributory negligence jurisdictions

Answer 10

last clear chance

Question 11

____is imposed by law on those participating in certain activities that are considered especially hazardous

Answer 11

Absolute Liability

Question 12

Another term that is sometimes used for absolute liability is:

Answer 12

Strict Liability

Question 13

__ is when a person may be held responsible for the negligent acts of another person who has direct liability.

Answer 13

Vicarious liability

Question 14

___ reimburse the injured party only for losses that were actually sustained. There are two types of ______: special and general.

Answer 14

Compensatory Damages

Question 15

____include all direct and specific expenses involved in a particular loss, such as medical expenses, lost wages, funeral expenses, and the cost to repair or replace damaged property. These are sometimes referred to as limited tort.

Answer 15

Special Damages

Question 16

____compensate for things such as pain and suffering and mental anguish. These are sometimes referred to as full tort.

Answer 16

General Damages

Question 17

_____are intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

Answer 17

Punitive Damages

Question 18

• Bodily injury—injury to the body
• Medical bills, lost wages, pain and suffering, and death
• Property damage—injury to property
• Cars, buildings, etc.
• Personal injury—hurt feelings of a person or business

Answer 18

Liability insurance

Question 19

• Split
• Bodily injury
• Property damage
• Combined single
• Per person
• Aggregate

Answer 19

Limits of Liability

Question 20

• Payment of a claim restores the occurrence limit for the next claim
• Payment of an occurrence reduces the aggregate limit
• Aggregate limit is restored upon renewal

Answer 20

Restoration of limits/Non-Reduction of limits

Question 21

What is B.A.I.L.E.D

Answer 21

■ Bonds—Premiums for certain types of bonds, such as bail bonds, appeal bonds, and release of attachment bonds
■ Aid (first aid)—First aid to others at the time of an accident
■ Interest—Prejudgment interest is the interest on court-ordered payments, and postjudgment interest is the interest accruing on the judgment after an award has been made but before payment is made by the insurance company.
■ Loss of earnings—Loss of earnings for the insured (such as when the insured is required to miss work for court appearances)
■ Expenses—Expenses incurred in the investigation of a claim, including claims adjuster costs, expert witness fees, et cetera; reasonable expenses incurred by the insured at the company’s request in the investigation or defense of a claim
■ Defense costs—The cost of hiring an attorney to defend the insured if sued, even if the insured is not liable, paid in addition to the per occurrence or policy aggregate limits

Question 22

The duties after loss condition in liability policies state that the insured must:

Answer 22

■ notify the insurance company in writing of all losses;
■ forward all applicable demands, notices, or summonses;
■ give any necessary assistance to the case, such as testifying as required; and
■ not voluntarily assume any liability or make any restitution to another party without the knowledge and consent of the insurer.

Question 23

All liability policies contain certain exclusions. We’ll examine these in detail when we look at specific policies, but we’ll mention some common exclusions here. In general, there is no coverage for:

Answer 23

• Damage to property of an insured
• Bodily injury to an insured
• Bodily injury to an employee
• Nuclear energy liability
• Intentional damage caused by an insured