Casualty and liability

Question 1

Pure risk

Answer 1

is one that will result in either a loss or no change in status—there is no possibility for gain

Question 2

speculative risk

Answer 2

on the other hand, may result in a loss, a gain, or no change in status

Question 3

Exposure

Answer 3

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.

Question 4

Peril

Answer 4

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

Question 5

third-party insurance because they provide coverage for loss to a third party to whom the insured owes a legal obligation.

Question 6

third-party claimant

Answer 6

who asserts a claim against the insured.

Question 7

tort

Answer 7

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

Question 8

Unintentional torts

Answer 8

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

Question 9

gross negligence

Answer 9

which is the failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of other

Question 10

Legal Duty of Care

Answer 10

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.

Question 11

Breach of Duty

Answer 11

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.

Question 12

Proximate Cause

Answer 12

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.

Question 13

Loss or Damage

Answer 13

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.

Question 14

Each of the following is an element of negligence, except:

Answer 14

There is an intervening cause

Question 15

Common Law Defenses

Answer 15

Common law defenses are those that are based on judicial or court decisions.

Question 16

Contributory Negligence

Answer 16

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.

Question 17

Which of the following is a common law defense used by the defendant when the injured claimant is partially responsible for their own injuries?

Answer 17

Contributory negligence

Question 18

Assumption of risk

Answer 18

The assumption of risk defense prevents recovery if the claimant knowingly assumed a risk, thus weakening or eliminating the defendant’s duty of care.

Question 19

Intervening Cause

Answer 19

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

Question 20

Act of God or Act of Nature

Answer 20

If an accident was produced by a physical cause of nature and not within human control or intervention, the defendant cannot be held liable

Question 21

Sudden Emergency

Answer 21

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.

Question 22

Comparative Negligence

Answer 22

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%).

Question 23

Statutory Defenses

Answer 23

Statutory law defenses are those that are based on legislation

Question 24

Statute of Limitations

Answer 24

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

Question 25

Contributory negligence

Answer 25

Common law defense claimant is partially negligent they may not recover damages

Question 26

Comparative negligence

Answer 26

Statutory defense claimant is partially negligent damages are reduced proportionately

Question 27

Compensatory Damages

Answer 27

Compensatory damages are awarded to an injured party to compensate for an actual sustained loss, and they may be special or general.

Question 28

Special Damages

Answer 28

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.

Question 29

General Damages

Answer 29

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

Question 30

Punitive Damages

Answer 30

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

Question 31

Which of the following damages is awarded to the injured party for the actual medical expenses incurred?

Answer 31

Special damages

Question 32

legally liable

Answer 32

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.

Question 33

Strict Liability

Answer 33

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.

Question 34

Absolute Liability

Answer 34

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

Question 35

Attractive Nuisance

Answer 35

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

Question 36

Vicarious liability

Answer 36

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.

Question 37

Vicarious liability also exists in many employer–employee relationships, known as

Answer 37

Vicarious liability also exists in many employer–employee relationships, known as respondeat superior.

Question 38

Owning dangerous animals, firearms, or explosives is associated with what type of liability?

Answer 38

Absolute liability

Question 39

Bodily Injury Liability

Answer 39

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

Question 40

Medical Payments Coverage

Answer 40

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

Question 41

Property Damage Liability

Answer 41

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).

Question 42

Personal and Advertising Injury Liability

Answer 42

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

Question 43

Per Occurrence Limit

Answer 43

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.

Question 44

Per Person Limit

Answer 44

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

Question 45

Aggregate Limit

Answer 45

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.

Question 46

Split Limits

Answer 46

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.

Question 47

Combined Single Limit

Answer 47

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.

Question 48

The most the policy will pay for the sum of all the losses that occur within a policy period is known as the:

Answer 48

Aggregate limit

Question 49

Duty to Defend

Answer 49

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.

Question 50

Consent to Settle provision, which would require the insurer to obtain the insured’s consent before settling a suit.

Question 51

supplementary payments

Answer 51

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.

Question 52

Premiums on appeal bonds and the insured's loss of earnings while assisting the insurer with a defense are covered:

Answer 52

By supplementary payments included in a liability policy

Question 53

Severability

Answer 53

The insurance provided applies to each insured separately, rather than to all insureds collectively, without increasing the policy’s limit of liability.

Question 54

Bankruptcy

Answer 54

Bankruptcy or insolvency of the insured does not relieve the insurer of any duties or obligations under the policy.

Question 55

Personal injury includes all of the following, except:

Answer 55

Bodily injury

Question 56

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:

Answer 56

D Contributory negligence

Question 57

All of the following statements regarding liability losses are correct, except:

Answer 57

Bodily injury includes personal injury, sickness, and disease

Question 58

Supplementary payments are best described as:

Answer 58

Payments for costs associated with investigating and resolving claims, such as premiums on appeal bonds

Question 59

General damages are those that:

Answer 59

Compensate an injured party for suffering, loss of consortium, and similar types of losses

Question 60

Liability insurance is a two-party contract with payments made to which of the following?

Answer 60

A third party

Question 61

Which of the following prevents recovery for injuries caused by a negligent party if the claimant was also negligent?

Answer 61

Contributory negligence

Question 62

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:

Answer 62

Per occurrence limit

Question 63

The Severability condition of a casualty insurance policy states:

Answer 63

That policy coverage considers each insured separately, except for the limit of liability