Chapter 3 - Casualty (Liability) Basics

Question 1

ABSOLUTE LIABILITY

Answer 1

a claimant does not have to prove fault in order to collect damages.

3.2

Obiously hazardous activities

Injured party does no need to prove negligence

Examples: pythons, dangerous animals

Question 2

AGGREGATE LIMIT

Answer 2

is the maximum amount payable for loss per location or per person from all occurrences within a policy period regardless of the number of separate accidents.

3.3

Question 3

ATTRACTIVE NUISANCE

Answer 3

An 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 attractive nuisance even when they are not expressly invited

Question 4

BODILY INJURY

Answer 4

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.

Examples: broken arm, a concussion, and food poisoning

Question 5

COMMON LAW

Law practiced as the result of judicial or court decisions (i.e., case law and precedents)

Answer 5

• Contributory Negligence – 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.
• Assumption of Risk – Prevents recovery if the claimant knowingly assumed the risk.
• Intervening Cause – 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. The intervening cause must be unexpected and unforeseen.

Question 6

COMPARATIVE NEGLIGENCE

Answer 6

involves fault on the part of all parties and the damages are reduced in proportion to the degree of negligence.

3.2

You can compensate your percentage of involvement

Question 7

COMPENSATORY DAMAGES

Awarded to the injured party for the actual loss sustained. Damages are Special or General

Answer 7

• Special Damages
  
  • are 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. Special damages are paid for tangible loss or damage
• General Damages
  
  • are an award to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses. General damages are paid for losses that cannot be calculated objectively and assigned a specific dollar value

Question 8

CONTRIBUTORY NEGLIGENCE

Answer 8

is a defense for negligence in which the claimant was also negligent to any degree.

3.2

Positioned under common law and you will not get paid if you contributed to the incident in any form or fashion

Question 9

DEFENSES

Answer 9

When a claimant accuses an insured of negligence, the insured may use one of several defenses:

Common Law or Statutory Law

Question 10

ELEMENTS OF NEGLIGENCE

Answer 10

• Duty is Owed
  
  • Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public
• Violation of Duty
  
  • 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 is Proximate Cause
  
  • Requires the injured party to prove the alleged wrongdoer’s negligent actions or inactions were the proximate cause of actual injuries or damages
• Foreseeable Consequence (needs to be damages from the cause of the loss)
  
  • 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

Note: If any of the four elements is absent, an act, or the failure to act, is not considered negligent.

Question 11

EXCESS POLICY

Answer 11

pays a covered claim after the primary policies exhaust their limits or deny coverage.

3.3

Question 12

GROSS NEGLIGENCE

Answer 12

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

Question 13

INTENTIONAL TORT

Answer 13

A deliberate act

and

that harms another and for which the injured party is permitted by law to sue the wrongdoer

3.1

Question 14

LEGAL LIABILITY

Answer 14

The responsibility, under law or contract, for an act or failure to act

Question 15

LIABILITY INSURANCE

Answer 15

provides coverage for most unintentional torts and excludes intentional torts.

3.1

Question 16

LIMITS OF LIABILITY

Answer 16

Each policy includes a provision that specifies the most it will pay in the event of loss. Certain limits of liability apply to any one loss; other limits apply to the total of all losses that occur within the policy period. In addition, the manner in which limits of liability are designated vary by coverage and policy type. The limit of liability, or limits of insurance, are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits.

• Per Occurrence Limit – 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.
• Per Person 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.

Question 17

LOSS OF CONSORTIUM

Answer 17

Compensation to a husband or wife for the loss of companionship of a spouse

Question 18

MEDICAL PAYMENTS COVERAGE

Answer 18

Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured’s activities. Coverage is provided for the payment of necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses. Payments are made regardless of the insured’s negligence. This coverage is provided to discourage liability claims and lawsuits and, when payments are made, are not an admission of liability.

Question 19

NEGLIGENCE

Answer 19

Failure to use ordinary care. For example, running a red light or like drinking coffee while driving a car

AND

Specifically, it is a wrongful act that is neither criminal nor a breach of contract that violates a duty or the rights of another — and for which the injured party may demand compensation. It is the failure to use the same degree of care a reasonable and prudent person would use when given the same knowledge and set of circumstances.

Question 20

NOTICE OF LOSS

Answer 20

Insured must notify the insurer in writing as soon as possible in the event of any loss or occurrence. 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.

Question 21

PERSONAL INJURY LIABILITY

Answer 21

Legal liability arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement. Personal injury is generally understood to affect one’s reputation or emotional well-being and is not bodily harm or property damage

I.E. Sorry I hurt your feelings

Question 22

PRO-RATE PROVISIONS

Answer 22

requires each insurer to pay its share of a loss in proportion to the coverage of that policy as it relates to the total of all insurance on the risk

Formula = Add the total of both policy limits then divide/ by the limit of the pro-rata policy = the amount to divide the amount to pay for the loss.

3.3

Question 23

PROPERTY DAMAGE LIABILITY

Answer 23

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).

Examples: vehicle damage after an accident and the vehicle owner’s inability to use the vehicle because it is not drivable (loss of use)

Question 24

PUNITIVE DAMAGES

Answer 24

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 punitive damages

Question 25

SPLIT LIMIT OF LIABILITY

Answer 25

is the amount of coverage divided between bodily injury and property damage.

3.3

Question 26

STATUTORY LAW

Written law enacted by legislatures

Answer 26

• Comparative Negligence – 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.
• Statute of Limitations – 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.

Question 27

STRICT AND ABSOLUTE LIABILITY

Answer 27

Strict and Absolute liability is 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

Laymen Terms: In some circumstances, an insured will be legally liable even in the absence of negligence

Examples: an employer is absolutely liable for its employees

an animal owner is absolutely liable for the animal

STRICT LIABILITY

Examples: applies to products liability

manufacturers are held strictly liable for damages to others caused by defective products or their failure to warn

Question 28

STRICT LIABILITY APPLIES TO PRODUCTS

Answer 28

If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective. Liability may be asserted even in the absence of negligence.

For example, the manufacturer of a dangerous product is always legally liable if the product causes injury or damage.

Question 29

TORT

Answer 29

A tort is 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.

3.1

Torts may result from either criminal or civil activity. Torts are either intentional, or unintentional. An intentional tort is a deliberate act that harms another and for which the injured party is permitted by law to sue the wrongdoer. An unintentional 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. Liability insurance provides coverage for most unintentional torts and excludes intentional torts

Question 30

UNINTENTIONAL TORT

Answer 30

An act, or failure to act, committed without reasonable care

Question 31

VICARIOUS LIABILITY

Answer 31

The liability 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.

Example: being responsible for someone else’s action, like a child damaging someone’s property, you as a parent are responsible.