Chapter 3 - Casualty/Liability Flashcards
Tort
Wrongful act
-violates the duty or rights of another for which compensation may be sought from the responsible party
Proof of Loss
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
Vicarious Liability
The liability assigned to one party for the conduct of another, based solely on a relationship between the two.
(employer/employee , parent/child)
Negligence
Failure to use ordinary care.
running a red light
Gross Negligence
Failure to exhibit any sort of care through recklessness or deliberate influence to the well-being of others.
(dui)
Attractive Nuisance
Artificial condition on land that attracts children, requires owner to exhibit a special duty of care.
(swimming pool, trampoline)
Loss of Consortium
Compensation to husband/wife for death of a spouse
A property purchased 10 years ago for $100,000 has a replacement value today of $200,000. It has depreciated 3% each year. What is today’s actual cash value?
A. $140,000
B. $200,000
C. $100,000
D. $70,000
A. $140,000
***Current replacement cost of $200,000 minus 30% depreciation = $140,000.
Compensatory Damages
Awarded to injured party for the actual loss sustained.
What are the 2 types of compensatory damages?
Special & General
Special Damages
award to an injured party for actual and known expenses such as bills, loss of earnings and costs to repair or replace damaged property
Punitive Damages
award to injured party, on top of compensatory damages to punish and discourage wrongdoer from repeating.
(not covered)
Property Damage Liability
Legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured.
(Property damage liability expenses include the actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use).)
Medical Payments Coverage
Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured’s activities.
(medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses. Payments are made regardless of negligence)
Personal Injury Liability
Legal liability arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage.
(libel, slander, false arrest, invasion of privacy, copyright infringement, etc..)
Notice of Loss
Insured must notify insurer in writing ASAP following a loss or occurence.
(the written notice should include the named insured, policy number, and details about the time, place, circumstances of the occurrence, and names and addresses of any claimants and witnesses.)
Certificate of Issuance
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.
(A certificate of insurance is not proof of insurance, as a binder is.)
Intentional Tort
deliberate act that harms another (negligence)
-injured party is permitted by law to sue the wrongdoer
(liability insurance excluded)
A (n)____ is a civil wrong committed by one person against another.
a. Tort
b. Accident
c. Breach
d. Punitive Damage
a. Tort
Comparative negligence
involves fault on the part of all parties and the damages are reduced in
proportion to the degree of negligence.
Split Limits
The most the policy will pay for loss of different types that occur as a result of any one loss, regardless of other limits.
Each of the following is an element of negligence, except:
a. A duty is owed
b. The duty is violated
c. There is a foreseeable consequence
d. There is an intervening cause
d. There is an intervening cause is NOT an element of Negligence
Which of the following is a common law defense used by the defendant when the
injured party is partially responsible for his own injuries?
a. Proximate cause
b. Contributory negligence
c. Absolute liability
d. Comparative negligence
b. Contributory negligence
Aggregate Limit
The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits.
Combined Single Limit
The most the policy will pay for all losses of all types rom anyone occurrence, regardless of other limits.
Assignment
The owner of a liability policy cannot transfer policy ownership without the insurer’s written consent
Bodily Injury Liability
Legal liability arising from physical injury,
(including sickness, disease, and death caused by the acts or omissions of an insured. Bodily injury liability expenses include medical bills, lost wages, mental anguish, pain and suffering, etc.)
Subrogation
After an insurer pays a loss, it is granted the insured’s rights to seek recovery from the party responsible for the loss.
*If Bob hurt Sally in a car accident, Sally’s insurance company with pay her but then sue Bob for reimbursement
Liberalization
When coverage is broadened by insurer w/o increase in premium, it must be applied automatically to all policies currently in effect.
The ______________________ is the most the policy will pay for the sum of all the losses occurring within a policy period.
a. Contribution
b. Excess
c. Combined
d. Aggregate
d. Aggregate
Tort
Wrongful act
intentional tort
deliberate wrongful act
Liability insurance
provides coverage for most unintentional torts and excludes intentional torts.
Vicarious liability
is assigned to one party for the conduct of another, based solely on a
relationship between the two.
Compensatory damages
are awarded to an injured party for actual loss sustained.
Special damages
are compensatory damages for tangible expenses such as bills, loss of earnings,
and the costs to repair or replace damaged property.
General damages
are compensatory damages for pain, suffering, mental anguish, disfigurement,
and similar types of losses that cannot be objectively calculated.
Medical payments coverage
pays for necessary medical, surgical, x–ray, dental, ambulance,
hospital, professional nursing, and funeral expenses incurred by a third party on the insured’s
premises regardless of fault.
Personal injury liability
is the legal liability arising from the wrongful conduct of the insured
resulting in injuries to one’s mental or emotional wellbeing and not bodily injury or property
damage.
Negligence
is a tort and, specifically, the failure to use the same degree of care a reasonable a prudent person would use when given the same knowledge and set of circumstances.
Contributory negligence
is a defense for negligence in which the claimant was also negligent to
any degree.
Property damage liability
pays for the legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. Property damage liability expenses include the actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use).
Which of the following may broaden the coverage found in an insurance policy?
A. Insuring Agreement
B. Conditions
C. Declarations
D. Endorsements
D. Endorsements
***Endorsements may be used to broaden, as well as restrict coverage set forth in the original policy.
Under absolute liability, a claimant does not have to prove _____ in order to collect damages.
Fault
Strict liability applies when a _________ is held liable whether or not its product was defective in causing injuries.
Manufacturer
What type of policy pays a covered claim when limits on primary policies have been reached?
a. Pro Rata Policy
b. Excess Policy
c. Conglomerate Policy
d. Overage Protection Policy
e. Primary Policy
b. Excess Policy
What does a Pro Rata Loss payment require?
It requires each insurer to pay their fair share in proportion to a loss according to coverages
Limit of Liability
the dollar amount of coverage specified for a liability loss
What are the 4 elements of Negligence?
1 .Duty Owed
- Violation of Duty
- Violation of Duty is Proximate (primary) Cause
- Foreseeable Consequence
Define “Duty Owed”
(element of Negligence)
Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public.
What does the “Violation of Duty is Proximate Cause” mean?
element of negligence
Injured party must prove wrongdoer’s negligent actions were the Proximate (primary) cause of injuries or damages.
Foreseeable Consequence
An element of negligence, this element 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.
How many elements must be present to prove an act or failure to act to be negligent?
4
Duty Owed, Violation of Duty, Violation of Duty is Proximate Cause & Foreseeable Consequence
Who would pay in the result of an accident if a no-fault liability system/law is in place where the accident occurred?
The injured party would collect insurance benefits from their own insurance, regardless of negligence or legal liability.
*Some states refer to this as Personal Injury Protection (PIP).
A party injured in an auto accident is not allowed to sue the negligent party who caused the accident under which of the following laws?
a. No-fault
b. Civil
c. Pure
d. Tart
a. No-Faullt
Which of the following presents a basis for holding an insured responsible due to vicarious liability?
a. Store employee damages insured’s vehicle while loading cargo.
b. Insured’s child injures a friend in a sports accident.
c. Repair person causes a fire fixing the insured’s furnace.
d. Neighbor’s lawn mower throws a rock damaging insured’s car.
b. Insured’s child injures a friend in a sports accident.
Absolute liability can be imposed by law and exist in the absence of
a. hazardous operations.
b. negligence.
c. products liability.
d. third party liability.
b. negligence
All of the following are examples of insurable interest EXCEPT
a. insuring your friend’s automobile.
b. insuring expensive jewelry.
c. insuring your home.
d. insuring business property you own.
a. insuring your friends automobile
***only owner can insure their items
All of the following statements about binders are true, except:
A. A binder specifies the effective date of coverage and amount of coverage
B. A binder specifies the premium amount
C. A binder specifies the insurer providing the coverage
D. A binder specifies the perils covered
B. Binder specifies the premium amount
Which of the following is not a condition found in an insurance policy?
A. Assignment
B. Subrogation
C. Liberalization
D. Insuring Agreement
D. Insuring Agreement
Which of the following constitutes the acceptance of an offer?
A. When the insurer makes a counteroffer
B. When the agent assures the applicant they will be covered
C. When the applicant completes the application
D. When an insurer issues a binder
D. When an insurer issues a Binder
Which part of a property insurance policy describes the perils?
A. Declarations
B. Additional Coverages
C. Definitions
D. Insuring Agreement
D. Insuring Agreement
All of the following statements regarding property insurance are correct, except:
A. A property that contains neither occupants nor personal property is deemed vacant
B. The insurer may cancel a policy, after providing proper notice
C. The owner of clothing left in the care of a dry cleaner is called a bailee
D. A binder is a temporary proof of insurance
C. The owner of clothing left in the care of a dry cleaner is called a bailee
Which of the following is not true about an insurance policy?
A. The Insuring Agreement includes the name of the insured
B. An application is a document that provides information for underwriting purposes
C. An insurance policy that pays before all other coverage is called primary coverage
D. A deductible is a specified amount of loss that is retained by the insured
A. The Insuring Agreement includes the name of the insured
The following are all found on the Declarations page, except:
A. The policy exclusions
B. Amount of the deductible
C. Location of the insured property
D. Expiration date of the policy
A. The policy exclusions
***The Declarations page contains the information necessary to tailor the policy to the individual and property insured. The exclusions, common to all policies, are found in the Exclusions section of the policy and coverage forms.
What is the only policy section that may change or be different for each customer?
A. The Exclusions
B. The Declarations
C. The Insuring Agreement
D. The Conditions
B. The Declarations
***The Declarations is specific to each property insured under a policy.
Which of the following parties may assign a standard property policy?
A. The bailee
B. The first named insured
C. The insured with prior written permission of the insurer
D. The insurer
C. The insured with prior written permission of the insurer
***The insured can only assign or transfer rights of ownership with prior written consent of the insurer.
General Damages
award to injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses
Which of the following is stated in the Insuring Agreement?
A. The Other Insurance provision
B. The perils excluded by the policy
C. The location of insured property and the named insured’s mailing address
D. The perils insured against
D. The Perils insured against
***The Insuring Agreement states the insurance company’s promise to pay the insured, including the exact perils insured against by the policy.
Which term describes the situation when two policies covering the same property contain different policy periods?
A. Nonconcurrency
B. Concurrent causation
C. Coinsurance
D. Blanket coverage
A. Nonconcurrency
***Nonconcurrency indicates the existence of two or more policies covering the same exposures that don’t have the same policy periods.
Proximate cause refers to:
A. A second negligent act that interferes with the chain of events leading to a loss
B. The fact that a policy restricts the territory to which coverage applies
C. The fact that a wrongdoer could not foresee the consequences of his/her actions
D. An unbroken chain of events leading to a loss, that were initiated in a negligent act of wrongdoing
D. An unbroken chain of events leading to a loss, that were initiated in an a negligent act of wrongdoing
***A proximate cause is any action on inaction leading to a loss by a chain of events unbroken by any intervening cause.
Loss of income suffered by a storeowner after their store is destroyed in a fire is considered a(n):
A. Delayed loss
B. Provisional loss
C. Indirect loss
D. Secondary loss
C. Indirect Loss
***The direct loss to the property is the damage caused by an insured peril, the fire. The indirect, or consequential, loss is further financial loss that results from the loss of business income due to the loss of the damaged store.
What is the injured party required to do to prove a “Violation of Duty”?
(element of negligence)
Injured party must prove the alleged wrongdoer not only owed a duty but also violated that duty. (didn’t exhibit reasonable care)
When the insured and the insurer fail to agree on the amount to be paid for a property loss, the dispute resolution method is called a(n):
A. Agreement Clause
B. Abandonment
C. Approximate Clause
D. Appraisal
D. Appraisal
***An appraisal is the procedure to be followed if the insured and insurer disagree on the amount of loss.
The Insuring Agreement of a policy describes:
A. The duties of the insured in the event of a loss
B. Perils that are covered
C. Transfer of the rights of recovery
D. Perils that are not covered
B. Perils that are covered
***The Insuring Agreement includes the perils insured against. The duties of the insured and the transfer of recovery rights (subrogation) would be included in the policy’s Conditions. Excluded perils would be listed in the Exclusions section.
Bodily injury liability
is the legal liability arising from physical injury, including sickness, disease,
and death caused by the acts or omissions of an insured. Bodily injury liability expenses include
medical bills, lost wages, mental anguish, disfigurement, pain and suffering, etc.
In property insurance, which clause prevents the insured from relinquishing ownership and leaving damaged property to the insurer and claiming a total loss?
A. Abandonment
B. Assignment
C. Loss Payable
D. Claim Settlement
A. Abandonment
***The Abandonment clause provides that the company will not accept property abandoned by an insured when there is a claim dispute.
Which of the following is used to resolve differences between the insured and the insurer?
A. Liberalization
B. Subrogation
C. Arbitration
D. Nonrenewal
C. Arbitration
***The arbitration provision of the insurance policy provides a method of settling disputes between the insurer and the insured as an alternative to legal action.
