Casualty and liability Flashcards
Pure risk
is one that will result in either a loss or no change in status—there is no possibility for gain
speculative risk
on the other hand, may result in a loss, a gain, or no change in status
Exposure
or loss exposure, is the condition of being at risk for a loss, whether or not an actual loss occurs. People and property are at risk of loss purely by existing.
Peril
is the cause of a loss. An insurance company will insure against specific perils, or causes of loss. Fire, lightning, wind, death, and disability are common perils covered by various insurance policies. Specific cause of loss
third-party insurance because they provide coverage for loss to a third party to whom the insured owes a legal obligation.
third-party claimant
who asserts a claim against the insured.
tort
a wrongful civil act—not including a criminal act or a breach of contract—that violates a duty or the rights of another, and for which the harmed party may seek compensation, known as damages. Torts may be either unintentional or intentional
Unintentional torts
are not caused by a deliberate act, but are the result of the failure to act as a reasonable or prudent person would under the same circumstances
gross negligence
which is the failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of other
Legal Duty of Care
A duty of care is the obligation to provide another party a certain standard of conduct. For example, a homeowner may owe a duty of care to guests, but not to trespassers.
Breach of Duty
To be negligent, a defendant must have breached the duty of care owed. For example, failing to observe traffic signals breaches the duty to drive safely and prudently.
Proximate Cause
Just as it is used in property insurance, the proximate cause is the primary cause of loss. To determine negligence, the negligent action or inaction must be the most important event in the chain of events that resulted in an injury. If the chain is broken, and the action or inaction is no longer the proximate cause, then negligence is not proven.
Loss or Damage
The claimant must suffer real and substantial injury or property loss to collect under a liability claim based on negligence. Further, in conjunction with the negligence being the proximate cause of loss, the loss or damage must be a reasonably foreseeable consequence of the act.
Each of the following is an element of negligence, except:
There is an intervening cause
Common Law Defenses
Common law defenses are those that are based on judicial or court decisions.
Contributory Negligence
A contributory negligence defense prevents recovery for damages caused by a negligent party if the claimant (plaintiff) was negligent to any extent. Not all states allow the use of this defense.If an injured claimant is 5% negligent and the defendant is 95% negligent, the claimant is not permitted to collect any damages because they contributed to the negligence that caused injury.
Which of the following is a common law defense used by the defendant when the injured claimant is partially responsible for their own injuries?
Contributory negligence
Assumption of risk
The assumption of risk defense prevents recovery if the claimant knowingly assumed a risk, thus weakening or eliminating the defendant’s duty of care.
Intervening Cause
The intervening cause defense prevents or limits recovery from the wrongdoer when a distinctly separate negligent act occurs after the original negligent act, but before damage occurs
Act of God or Act of Nature
If an accident was produced by a physical cause of nature and not within human control or intervention, the defendant cannot be held liable
Sudden Emergency
The defendant cannot be liable for an injury that was caused when the defendant, who was acting with reasonable care, experienced a sudden, unforeseeable medical emergency that prevented them from continuing to act with the same care. An example would be if the driver of a car faints, and fainting results in an accident.
Comparative Negligence
With a comparative negligence defense, a claimant who is partially negligent is still entitled to damages, but damages are reduced in proportion to the claimant’s negligence. Most states have adopted laws to replace contributory negligence with comparative negligence, and many states establish a percentage at which a claimant’s negligence will bar recovery (typically 50% or 51%).
Statutory Defenses
Statutory law defenses are those that are based on legislation
Statute of Limitations
The statute of limitations is the length of time during which legal proceedings may be initiated, set either by state or federal law, usually beginning the day an event occurs
Contributory negligence
Common law defense
claimant is partially negligent they may not recover damages
Comparative negligence
Statutory defense
claimant is partially negligent damages are reduced proportionately
Compensatory Damages
Compensatory damages are awarded to an injured party to compensate for an actual sustained loss, and they may be special or general.
Special Damages
Special damages are awarded to an injured party for tangible and known expenses. These are specific amounts that are unique to the claimant, such as bills, loss of earnings, and the costs of repairing or replacing damaged property.
General Damages
General damages are awarded to compensate for noneconomic losses that are difficult to calculate and that would be experienced by anyone in similar circumstances. Examples of general damages include payments for pain, suffering, mental anguish, disfigurement, and loss of consortium
Punitive Damages
In some cases, the law will allow damages to be awarded in addition to compensatory damages in order to punish and discourage a wrongdoer from repeating negligent acts or omissions
Which of the following damages is awarded to the injured party for the actual medical expenses incurred?
Special damages
legally liable
Legal liability can be criminal or civil. Criminal liability is not insurable. Civil liability involves actions against persons to demand monetary compensation or other relief, such as a specific performance. Most civil liability is insurable.
Strict Liability
bility is used in the context of a manufacturer or seller of a product who is liable for all damages caused by a defective product, without regard to fault or negligence. Applying the concept of strict liability to product development helps improve the quality of products because the business would be liable if it made or sold defective products.
Absolute Liability
is most often associated with dangerous animal ownership, storage of firearms or weapons, and possession of explosive or highly flammable material. Absolute liability is also associated with an employer’s liability when an employee is injured at work
Attractive Nuisance
is an artificial condition on land that attracts children, such as a swimming pool. Even if they are trespassing onto someone’s property, children are legally considered invitees if the premises contains an attractive nuisance, and the property owner may be held absolutely liable for resulting injurie
Vicarious liability
also known as imputed negligence, means that the negligence is not directly attributable to the person against whom a claim is made, but that person is responsible for the acts of the negligent party.
Vicarious liability also exists in many employer–employee relationships, known as
Vicarious liability also exists in many employer–employee relationships, known as respondeat superior.
Owning dangerous animals, firearms, or explosives is associated with what type of liability?
Absolute liability
Bodily Injury Liability
Bodily injury refers to physical injury, including sickness, disease, and death. Bodily injury liability expenses may include medical bills, lost wages, mental anguish, or disfigurement
Medical Payments Coverage
medical, surgical, X-ray, dental, ambulance, hospital, professional nursing, and funeral expenses that result from injuries sustained on an insured location or as a result of the insured’s activities. Payments are made regardless of negligence, and any payment that is made is not an admission of liability
Property Damage Liability
Property damage liability covers losses arising from physical damage to the tangible property of a third party caused by the acts of an insured. Expenses include the actual cost to repair or replace the damaged property as well as costs incurred from the inability to use it (known as loss of use).
Personal and Advertising Injury Liability
Personal and advertising injury liability covers injuries to a third party that are not bodily injury or property damage. In the context of insurance, personal injury does not refer to physical injury. Instead, personal injury refers to certain types of harm that affect a person’s reputation or emotional well-being, such as libel, slander, false arrest, and invasion of privacy
Per Occurrence Limit
The per occurrence limit is the most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits. For example, the limit of liability applying to bodily injury and property damage liability coverage on a Homeowners policy is a per occurrence limit.
Per Person Limit
The per person limit is the most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits. For example, the limit of liability for medical payments coverage is always a per person limi
Aggregate Limit
e aggregate limit is the maximum amount the policy will pay for all losses submitted during the policy period, regardless of other policy limits. In other words, an aggregate limit caps the amount of coverage available for all covered claims during the entire policy period, regardless of the number of occurrences or claimants. Each loss payment under a per occurrence limit or per person limit reduces the aggregate limit of liability.
Split Limits
Split limits indicate the most the policy will pay for different types of losses that occur as a result of any one loss, regardless of other limits.
Combined Single Limit
The combined single limit is the most the policy will pay for all losses of all types resulting from any one occurrence, regardless of other limits. These are often used for auto insurance policies, in which case a single per occurrence limit is provided for both bodily injury and property damage claims.
The most the policy will pay for the sum of all the losses that occur within a policy period is known as the:
Aggregate limit
Duty to Defend
If a liability claim is made against an insured for injury or damage covered by an insurance policy, most policies will stipulate in the Insuring Agreement that the insurer has a duty to defend the insured in court proceedings. Any defense costs incurred by the insurer are covered in addition to the policy limit, meaning those expenses do not reduce the limit of insurance. The insurer’s duty ends when the policy limit has been exhausted by judgments or settlements.
Consent to Settle provision, which would require the insurer to obtain the insured’s consent before settling a suit.
supplementary payments
are payments by the insurer for the costs associated with investigating and resolving claims, such as premiums on appeal bonds, pre- and post-judgment interest, and the insured’s loss of earnings while assisting the insurer in defending a claim. These payments are always paid in addition to policy limits.
Premiums on appeal bonds and the insured’s loss of earnings while assisting the insurer with a defense are covered:
By supplementary payments included in a liability policy
Severability
The insurance provided applies to each insured separately, rather than to all insureds collectively, without increasing the policy’s limit of liability.
Bankruptcy
Bankruptcy or insolvency of the insured does not relieve the insurer of any duties or obligations under the policy.
Personal injury includes all of the following, except:
Bodily injury
A claimant brings suit against the insured for negligence. The insured’s defense argues that the claimant participated in causing the loss and was partially negligent, meaning the claimant is not owed any damages for the loss. This is an example of:
D
Contributory negligence
All of the following statements regarding liability losses are correct, except:
Bodily injury includes personal injury, sickness, and disease
Supplementary payments are best described as:
Payments for costs associated with investigating and resolving claims, such as premiums on appeal bonds
General damages are those that:
Compensate an injured party for suffering, loss of consortium, and similar types of losses
Liability insurance is a two-party contract with payments made to which of the following?
A third party
Which of the following prevents recovery for injuries caused by a negligent party if the claimant was also negligent?
Contributory negligence
In liability insurance, the most the policy will pay for a loss arising out of any one occurrence, regardless of overall policy limits, is known as the:
Per occurrence limit
The Severability condition of a casualty insurance policy states:
That policy coverage considers each insured separately, except for the limit of liability
