Casualty (Liability) Basics Flashcards
What is a liability policy?
A liability policy provides protection for legal liability arising from unintentional torts for bodily injury or property damage to others.
Also referred to as 3rd party insurance
another name for liability insurance
Third-party Insurance
Name the 1st, 2nd, and 3rd parties to insurance
1st-insured
2nd-insurer
3rd-claimant
the responsibility under law or contract for an act or failure to act
legal liability
a wrongful act, other than a breach of contract, that violates a duty or the rights of another and for which compensation may be sought from the responsible party
Tort
a deliberate act that harms another and for which the injured party is permitted by law to sue the wrongdoer
intentional tort
also known as negligence, is an act, or failure to act that is committed without the same level of care a reasonable individual would have exhibited given the same knowledge and set of circumstances
unintentional tort
assigned to one party for the conduct of another, based solely on a relationship between the two. Examples include employer/employee relationships and parent/child relationships.
Vicarious Liability
Failure to use ordinary care. For example, running a red light.
Negligence
Failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of others. For example, driving while under the influence of alcohol
Gross Negligence
artificial condition on land that attracts children, such as a swimming pool, and requires the owner to exhibit a special duty of care. Legally, children are considered invitees to the premises if it contains an _________even when they are not expressly invited.
Attractive Nuisance
Compensation to a husband or wife for the loss of companionship of a spouse
Loss of Consortium
Awarded to the injured party for the actual loss sustained
Compensatory Damages
what are the two types of compensatory damages?
Special or General.
an award to an injured party for actual and known expenses such as bills, loss of earnings, and the costs of repairing or replacing damaged property. Paid for tangible loss or damage
Special damages
an award to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses. paid for losses that cannot be calculated objectively and assigned a specific dollar value.
General Damages
An award to an injured party, in addition to compensatory damages, to punish and discourage a wrongdoer from repeating negligent acts or omissions. Most liability policies do not provide coverage for this.
Punitive Damages
Legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured. Expenses include medical bills, lost wages, mental anguish, pain and suffering, etc.
Bodily Injury
arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. Expenses include: actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use).
Property Damage Liability
Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured’s activities. This coverage is provided to discourage liability claims and lawsuits and, when payments are made, are not an admission of liability.
medical payments coverage
arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage. Includes: libel, slander, false arrest, invasion of privacy, and copyright infringement. anything considered to affect one’s reputation or emotional well-being
Personal Injury Liability
sudden, unforeseen, unintended, and unplanned event from which loss or damage results.
accident
An accident includes continuous or repeated exposure to the same general harmful conditions.
occurance
Insured must notify the insurer in writing as soon as possible in the event of any loss or occurrence.
Notice of Loss
The written notice should include:
named insured, policy number, and details about the time, place, circumstances of the occurrence, and names and addresses of any claimants and witnesses.
A formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy
proof of loss
A document that shows evidence that specific types of insurance were purchased by the insured, at certain limits, and that they were in place on the date the certificate of insurance was issued
Certificate of Insurance
Element of Negligence:
In order for an act or failure to act to be negligent, it must contain these 4 elements:
( If any of the four elements is absent, an act, or the failure to act, is not considered negligent.)
Duty is owed, violation of duty, violation of duty is proximate cause, foreseeable consequence
element of negligence:
Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public.
Duty is owed
Elements of Negligence:
Requires the injured party to prove the alleged wrongdoer not only owed a duty but also violated that duty. Basically, the alleged wrongdoer didn’t exhibit reasonable care.
Violation of Duty
elements of negligence:
Requires the injured party to prove the alleged wrongdoer’s negligent actions or inactions were the proximate cause of actual injuries or damages.
Violation of Duty is Proximate Cause
Elements of Negligence:
Requires the injured party to prove the actual injuries or damages were a reasonably foreseeable consequence at the time the negligent action or inaction occurred.
Foreseeable Consequence
Law practiced as the result of judicial or court decisions (i.e., case law and precedents).
Common Law
Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant is not permitted to collect damages
Contributory Negligence
Prevents recovery if the claimant knowingly assumed the risk.
Assumption of Risk
Prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss
Intervening Cause
Written law enacted by legislatures.
Statutory Law
Damages are reduced in proportion to the degree of the claimant’s negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages.
Comparative Negligence
The length of time during which legal proceedings may be initiated. This time period is established by federal or state law and usually begins on the day an event occurs.
Statute of Limitations
Which of the following is a common law defense used by the insured when the injured party is partially responsible for his own injuries?
a. proximate cause
b. comparative negligence
c. absolute liability
d. contributory negligence
D. Contributory negligence
a legal principle that imposes legal liability based on conditions, activities, or products that exhibit very high hazards; the degree of care exercised by the insured isn’t considered when making a determination of liability.
Strict and Absolute Liability
often associated with dangerous animal ownership, abnormally dangerous activities, and employers liability for injuries sustained by their employees. Dangerous animals include lions, bears, and certain dog breeds such as pit bulls and rottweillers. ________applies to the storage of explosives, highly flammable material and weapons or firearms.
Absolute liability
If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective.
Strict Liability (applies to products)
the injured party collects insurance benefits from his or her own insurance as if it were first-party coverage, thus eliminating the process of determining negligence or legal liability. _______ laws vary by state and typically apply to auto insurance.
No-Fault Liability
These conditions are called a threshold and can either be a monetary limit (e.g., $5,000) or described verbally (e.g., death, facial injuries, or broken bones).
no-fault laws restrict the rights of the injured party to sue unless the injuries are severe (e.g., paralysis or death) and meet certain conditions
Some no-fault laws allow the insured to choose whether their policy operates under a no-fault or:
tort basis
Some states refer to their no-fault laws and coverage as
personal injury protection (PIP)
Under_____ the tort system is abolished and a party who is negligent and causes injury to another does not have to pay for those injuries.
no-fault
Common Policy Provisions:
The person or organization designated on the Declarations page of the policy as being protected by an insurance contract.
Named Insured
A person or organization protected by an insurance contract
Insured
The name of the person or organization that appears first on the Declarations page of a policy as “named insured.”
First Named Insured
A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a liability policy, an _____ is often a party to an indemnification or hold harmless agreement.
Additional Insured(s)
a provision that specifies the process to be followed when more than one policy covers the same loss.
Other insurance
it makes payment before all other policies in place make payment for a loss.
Primary Policy
it makes payment only after all other insurance in place exhausts its limits or denies coverage.
Excess Policy
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss and the method of sharing varies by contract.
Pro Rata Liability
Some policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance
contribution by equal shares
Policy A insures a dwelling for $250,000 and Policy B insures the same dwelling for $500,000. If both policies covered the same loss, Policy A would pay how much?
one-third of the loss because $250,000 represents 1/3 of all the insurance available to cover the loss ($250,000 equals 1/3 of $750,000, which is the sum of $250,000 on Policy A and $500,000 on Policy B).
Each policy includes a provision that specifies the most it will pay in the event of loss.
Limits of Liability
The limit of liability, or limits of insurance, are shown on the:
policy declarations page
The most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits.
Example: The limit of liability for personal liability on a homeowners policy is a _____
Per Occurrence Limit
The most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits.
Example: The limit of liability for medical payments coverage on an auto policy is a ________
per person limit.
The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits.
Aggregate Limits
reduces the aggregate limit of liability.
Each loss payment made under a per occurrence limit or per person limit
The most the policy will pay for loss of different types that occur as a result of any one loss, regardless of other limits.
Split Limit
the limits of liability on an auto policy for bodily injury might be represented as 100/300/100 ($100,000 is the _____ limit for_____, $300,000 is the _____ limit for _____, and $100,000 is the ____ limit for ______).
$100,000 is the per person limit for bodily injury liability,
$300,000 is the per occurrence limit for bodily injury
$100,000 is the per occurrence limit for property damage liability
The most the policy will pay for all losses of all types resulting from any one occurrence, regardless of other limits.
Combined Single Limit
The _____ limit pays for any coverage wherever needed or in any combination.
Combined single
The owner of a liability policy cannot transfer policy ownership without the insurer’s written consent.
Assignment
After an insurer pays a loss, it is granted the insured’s rights to seek recovery from the party responsible for the loss. For example, if Bob is legally responsible for injuring Sue in a car accident, Sue’s insurance company may seek reimbursement from Bob for the claim payments it made to Sue.
Subrogation
When coverage under a particular form of insurance issued by an insurer is broadened without an additional premium charge, it automatically applies to all policies currently in effect. For example, Carrier A adds coverage enhancements to its Special Form homeowners policy, without an additional charge. Those changes automatically apply to all policies currently in effect.
Liberalization
A————— is a document stating that an insurance policy is in force. It is used to provide proof of insurance to property owners, contractors, and others who may require liability insurance. Perils would be included in a binder, not a ———-. The premium amount appears only in the policy, not on the ——– or binder.
certificate of insurance
When a person participates in an activity where a certain type of injury is known to be probable, that person’s rights of recovery are barred or diminished under the doctrine of __________
assumption of risk
