Chapter 5

Question 1

Define liability insurance

Answer 1

Insurance that agrees to indemnify the insured for sums she may be required by law to pay to third parties as damages for bodily injury or damage to property. The maximum amount of insurance provided under a policy of liability insurance.

Question 2

Third party insurance

Answer 2

Liability insurance is purchased by the insured from an insurer to compensate or indemnify another for damage or loss for which the insured is lawfully liable

Question 3

What three points does a plaintiff have to prove in order for their general liability policy to protect the insured from legal liability

Answer 3

1. The defendant owed the plaintiff of duty of care
2. The defendant broke that duty of Care by his or her actions
3. The defendant’s actions caused injury to the plaintiff

Question 4

List two reasons why liability insurance is somewhat more difficult to underwrite than other types of insurance

Answer 4

1. An applicant can be sued for any harm for which another person or organization wants to recover damages for from the applicants
2. Once a lawsuit has gone to trial, it is uncertain whether the applicant will be found legally liable for the third party’s loss or injury. Nor is it possible, if the applicant is found liable, to be sure of the damages that the court will require the applicant to pay.

Question 5

What three instances must occur before a third party’s injury or loss can become a loss under a liability policy

Answer 5

1. The third party must consider the injury or lost serious enough to pursue a grievance
2. The grievance must be difficult enough to resolve that the parties to the lawsuit are unable to settle it out of court
3. The resulting trial must end in favor of the third party

Question 6

What is one of the primary considerations for a liability underwriter

Answer 6

One of the primary considerations for a liability underwriter is whether the exposures to loss presented by a given applicant arer unusual

Question 7

Statute law and give an example of one

Answer 7

A law set down in a government act and passed by legislature ( written law )

Occupiers liability act - to codify standards of behaviour and define responsibilities regarding premises liability

Question 8

List 3 jurisdictions of government and examples

Answer 8

Federal - military affairs, foreign relations, the national currency, the postal service, financial regulation of banks, and insurance companies

Provincial and territorial - property rights, education, health care, and the regulation of the insurance industry

Municipal - police, fire, water, and other services that municipalities are authorized by provincial governments to provide or perform within their boundaries

Question 9

Define tort

Answer 9

Illegal wrong arising from a duty fixed by law. A breach of this duty that causes injury to persons or property is repressible by legal action for damages. Liability for tort involves a private or civil wrong or injury and is distinct from liability under contract in that the duty is owed to people, generally, rather than to a specific individual

Question 10

Define negligence

Answer 10

Failure to use the degree of care expected from a reasonable or prudent person

Question 11

Define duty of care

Answer 11

The obligation that a person has to exercise reasonable care with respect to the interest of others including protecting them from harm

Question 12

What two ways my civil law impose liabilities and what are the most common torts

Answer 12

1. Tort
2. Breach of contract

Negligence and nuisance are the most common torts

Question 13

List three ways to commit a tort

Answer 13

1. An intentional act
2. A negligent act
3. A failure to act

Question 14

Define duty of care

Answer 14

The obligation that a person has to exercise reasonable care with respect to the interests of others, including protecting them from harm

Question 15

To establish a cause of legal action for negligence list three things that must be shown to exist to satisfy a court

Answer 15

1. A duty of care exists
2. The duty was breached
3. There is a casual relationship between the breach and the damage

Question 16

Define private nuisance

Answer 16

An unlawful interference of a person’s enjoyment and use of his or her land

Question 17

Define public nuisance

Answer 17

An action or a thing that interferes with the general public. It interferes with the public as a class, not merely with one person or a group of citizens

Question 18

Define nuisance

Answer 18

In-law, a class of wrong that arises out of unreasonable, unwarranted, or unlawful use by a person of his own property, whether that property be real or personal or from his own improper, indecent, or unlawful personal conduct and producing an annoyance, and convenience, discomfort, or hurt to others or to their property that the law would presume a consequential damage. In Insurance claims, it is more frequently met as a cause of action, arising from The escape of an obnoxious substance

Question 19

Define occupancy

Answer 19

The act of holding possession of a property or premises. The term implies the use of the building for the purposes described in the policy, and no other. And occupied building has furnishings and/or people in it

Question 20

When does a breach of contract occur?

Answer 20

A breach of contract occurs when one of the parties to the contract fails to fulfill one of its obligations under the contract.

Question 21

Define contract

Answer 21

A contract is illegally binding agreement between two or more persons for a particular purpose

Question 22

What are the two more widely underwritten types of liability exposures?

Answer 22

Premises liability and products liability

Question 23

Define premises liability

Answer 23

Premises liability arises out of the risks use of physical premises, such as buildings, the land on which it stands, or both, from an owner, A landlord, or a tenant.

To assess a risks premises liability exposure, the underwriters analysis should include an examination of the occupancy, in particular, the duty of care owed to others by the applicant as the occupier of the premises.

Question 24

Define trespasser

Answer 24

A person who wrongfully enters onto someone else’s land with neither the right or permission to be there.

Question 25

Define licensee

Answer 25

A person who has permission to enter a premises for his or her own purpose

Question 26

Define contractual entrant

Answer 26

A person who enters on two premises under a contract with the occupier dash for example a hotel guest or a theater-goer

Question 27

Define invitee

Answer 27

A person who is expressly or impededly invited on to the premises for some purpose involving economic or potential economic benefit to the occupier of the premises. For example, a customer entering a store to make a purchase

Question 28

What is the duty of care owed to a trespasser?

Answer 28

An occupier owes the lowest duty of care to a trespasser. Still, the occupier must treat the trespasser with common humanity.

Question 29

List five factors that determine whether an occupiers duty of care to trespassers has been breached

Answer 29

1. The gravity and likelihood of probable injury
2. The character of the intrusion or trespass
3. The nature of the premises trespassed on
4. The knowledge the occupier had or ought to have had of the likelihood of a trespasser’s presence
5. The cost to the occupier of preventing the harm to the trespasser

Question 30

What is the occupiers duty of care to a licensee

Answer 30

An occupier owes a greater duty of care to a licensee then to a trespasser. An occupier has a duty to protect a licensee from known concealed traps or dangers

Question 31

What is an occupier’s duty of care to a contractual entrant

Answer 31

The occupies duty to a contractual entrant is as specified in the contract. If the contract does not specify the occupiers obligations regarding the entrance safety, then the contract is said to have an implied term to the effect that the premises are as safe for the purpose as reasonable care and skill on the part of anyone can make them.

Question 32

Whats the occupiers duty of care to an invitee

Answer 32

The occupier owes the greatest duty of care to an invitee. The occupiers duty is to exercise reasonable care to prevent damage to such a person from unusual danger of which the occupier knows or ought to have known.

Question 33

Define hold harmless agreement

Answer 33

An agreement that allows one party to protect another party against any future losses or claims that may result from a particular activity. Also known as an indemnity agreement

Question 34

Define indemnity agreement

Answer 34

I’ve written contract entered into between indigenator and surety in which the indignator secure surety against loss security May sustain as a result of having issued a bond for a third party ( usually a company owed by the indignator ) or for the indignator

Question 35

List nine steps in underwriter should consider an underwriting the premises liability exposure

Answer 35

1. Know the exposure, the occupancy, and the applicants activities
2. Understand the legal requirements in the jurisdiction where the risk is located
3. Review the risks loss history
4. Review the loss control reports
5. Follow up on any recommendations outstanding from those lost control reports
6. Find out whether the applicant keeps records of incidents or accidents, maintenance logs, and records of routine inspections.
7. Find out what contracts the applicant is party to and ask if the applicant obtained certificates of insurance from its contractors
8. Understand who any additional named insurds on the application are and what their relationship are to the applicant
9. Find out if the applicant is named as an additional insured on the other policies, such as a contractor’s policy

Question 36

Define products liability

Answer 36

Products liability exposure arises from the possibility of injury to a third party from the use of a risks product. There can be product liability exposures for many commercial risks. If the product is a consumable product, such as food, the risk is heightened because the consequences for consumer of an inferior or perhaps unsafe product are more serious when the product is ingested. The exposure is also heightened because quality control is so much more difficult with a consumable product.

Question 37

Whether the product is consumable or not, the underwriters analysis of a general product liability exposure should include underwriting details appropriate to any exposure such as

Answer 37

1. The name and address of the risk
2. The number of years it has been in business
3. It’s payroll and receipts and other measures of its financial well-being

Question 38

Define employer’s liability insurance

Answer 38

Coverage for the legal liability and posed on an employer to pay damages to an employee injured by the employer’s negligence. This is not workers compensation insurance, where special acts of legislature set out specifically the relationship between the employer and employees in certain circumstances and the formula by which awards in each case are computed

Question 39

List 14 specific points to consider when analyzing products liability

Answer 39

1. Who manufactures the products that the applicant sells
2. What products does the applicant manufacturer? What is the final use of the products?
3. Does the applicant modify or alter products received from other manufacturers before selling them?
4. What is the distribution of the applicant’s products - local, national, or international? In particular, is the product distributed in the United states?
5. Do any of the applicants products contain parts or materials manufactured by other companies?
6. Are any of the products flammable, explosive, or toxic with normal use
7. Can the consumer or end user alter the products?
8. Do the products carry warranty or an Express guarantee of performance or other aspects of the products? Does the applicant install, maintain or service products once they’re sold
9. Has any product been discontinued or recalled? If so why?
10. Our instruction manuals provided to consumers or end users to indicate the correct use of the risks products, inherent hazards, maintenance requirements, assembly and installation procedures and precautions, and other information relating to product safety and use?
11. what quality control process has the risk implemented? Are written records kept, not just on quality control, but also on consumer applicants and corrective actions taken in response to those applicants?
12. Does the applicant have a hold harmless agreement with any third party
    13 does app can already have liability insurance? What other coverages does the applicant already have, and who are the current insurers
13. Has the applicant had to make a claim on an existing insurance? Has there been any corrective action taken to eliminate the conditions that cause the accident that led to the claim?

Question 40

What are some circumstances that a commercial risk may also need employers liability coverages? List three

Answer 40

1. If an employee is working outside the jurisdiction for a certain period of time or longer
2. If the employer has assumed certain liabilities under contract
3. If workers compensation Insurance benefits are denied to an injured worker because the injury was not incurred on the job

Question 41

Define contributory negligence

Answer 41

Many accidents are the partial fault of both parties who are involved in the accident. The plaintiff who sues another party for damages may also be guilty of some negligence, which is a concurrent cause of the damage, and therefore is guilty of contributory negligence.

Question 42

In what circumstances will an underwriter ask questions about an owner’s lifestyle, occupation, and hobbies?

Answer 42

To assess the liability exposure is posed by an applicant for personal insurance - say, A dwelling owner - a liability underwriter will ask questions about the owner’s lifestyle, occupation and hobbies.

Question 43

List 10 questions regarding the applicants dwelling the underwriter will want to know in regards to personal insurance coverage for liability exposures

Answer 43

1. Does the dwelling have a swimming pool?
2. Is there a deck?
3. Does the pool have a diving board?
4. How deep is the pool at each end?
5. Is the pool surrounded by a fence with the gate that is locked on the pool is not in use?
6. Is the pool always supervised by an adult?
7. Does the dwelling owner entertain guests or visitors around the pool?
8. What these visitors include children?
9. Is the pool kept properly chlorinated and otherwise well maintained?
10. Is the pool equipped with life saving equipment?

Question 44

Define umbrella policy

Answer 44

A special form of liability policy designed to protect the insured for certain unknown contingencies over and above coverages and to provide exccess insurance

Question 45

List three benefits in addition to those under ordinary liability insurance for a personal umbrella policy

Answer 45

1. Limits of insurance in excess of those in primary policy
2. Drop Dash down coverage to cover certain exposures that the primary policy does not
3. Territorial limits wider than those in the primary policy

Question 46

List four things that might be included in the broader coverage under an umbrella policy

Answer 46

1. Broader premises liability coverage
2. Excess automobile liability coverage - excess automobile liability coverage response to damages awarded against the insured in connection with loss under the insurance automobile insurance but greater than the limits under that insurance
3. Coverage for liability arising out of the use of watercraft and non-owned aircraft
4. Coverage of the policyholders employers liability

Question 47

Why are premiums for personal umbrella insurance tend to be fairly low?

Answer 47

No premium for personal umbrella insurance tends to be fairly low because the exposures that are it covers our second dash level - that is, they’re contingent on other events. The umbrella policy pays only if another policy either does not cover the exposure or does not provide enough coverage.