Chapter 5

Question 1

What type of coverage pays a third party for damage that the insured causes to that person or their property?

Answer 1

Casualty or Liability Insurance

Question 2

What is a tort?

Answer 2

An injury to another or damage to another’s property?

Question 3

What is an intentional tort?

Answer 3

Any intentional act which injures another.

Question 4

Are intentional acts of the insured covered under liability insurance?

Answer 4

No, always listed as exclusion.

Question 5

What is a negligent tort?

Answer 5

Carelessly causing injury to a third party or damage to a third party’s property. (EX: drunk driving that results in accident).

Drunk driving is covered under negligence insurance.

Question 6

What is Negligence?

Answer 6

Failure to do what a reasonable person would do under the same circumstances. It may also be said that negligence involves invading the rights of others.

Ex: wearing seat belts

Question 7

What are the four elements or criteria used to determine negligence?

Answer 7

Duty — Duty to act as a reasonable person
Breach of duty — bid he/she breach the duty to act as a reasonable person?
Damages — No damages? No negligence
Proximate Cause — the initial act which directly or foreseeably caused the damage.

Question 8

True/False

Firing a gun into the air would be considered negligence.

Answer 8

Depends, were there damages that occurred as a result. If there are no damages, there is no negligence, even through it meets the other criteria for negligence.

Question 9

What are the three separate coverages under liability policies?

Answer 9

1. Medical payments
2. Supplementary payments
3. Liability payments

Question 10

What does Medical payments (Med Pay) cover?

Answer 10

Payment of medical expenses without regard to fault. Medical bills only

Medical payments has its own limit of liability:
5000 for commercial policies, 1000 for Homeowners

Medical Payment (Med Pay) coverage limit is per person, not per event, regardless of fault.

Question 11

What does Supplementary Payments cover?

Answer 11

Covers the insured defense costs.

Lawyer’s fees, cost of private investigators/expert witnesses, Expenses incurred by the insured to assist defense lawyers, bonds posted as part of lawsuit, interest awarded on the judgement.

Question 12

Will Supplementary payments pay the cost of legal fees in frivolous lawsuits?

Answer 12

Yes

Question 13

What are liability payments?

Answer 13

Liability Payment compensate the injured 3rd part if the insured acted negligently. Comes into play if the insured is ordered to pay damages by a court order.

Question 14

Are there limits to liability payments?

Answer 14

Yes, liability usually has a split limit, contains a limit the policy will pay for each event, referred to as the Occurrence Limit, and a limit that the policy will pay for all claims during the policy year Aggregate limit.

Question 15

What categories of liability payments are covered under liability insurance?

Answer 15

Bodily Injury Liability — always covered
Property Damage Liability — always covered
Personal Injury Liability — sometimes covered

Question 16

What does Bodily Injury, referred to as BI coverage actually cover?

Answer 16

Bodily Injury includes injury, pain and suffering, disease, and death.

Question 17

What does property damage cover under the liability policy?

Answer 17

Property damage will pay for our negligence caused by Property damage to a 3rd party’s property.

Question 18

Will most liability policies cover Personal Injury.

Answer 18

No, personal injury involves non-physical harm doesn’t to a person’s psyche or reputation. Not typically covered. Home owner’s policies and auto liability will not cover personal insure. Commercial policies often will cover personal injury.

Question 19

What are examples of items covered under personal injury?

Answer 19

False arrest 
Malicious prosecution
Wrongful entry or eviction
Libel
Slander (spoken false statement)
Invasion of right to privacy
Adverting injury

Question 20

What are some other names for personal injury?

Answer 20

Personal injury
Advertising injury
Personal and Advertising Injuary
Unfair Competition
Infringement

Question 21

What are the two type of damages awarded?

Answer 21

Compensatory Damages (Actual Damages)
Punitive Damages

Question 22

What are compensatory damages?

Answer 22

Damages paid to the plaintiff as compensation for the harm the insured can sued.

Question 23

What are Punitive damages?

Answer 23

Punitive dames are intended to punish the defendant, are also referred to as exemplary damages because they make example of misconduct. Punitive damages are usually excluded from coverage.

Question 24

What 2 ways are liability insurance companies legally obligated to pay if the insured injures a 3rd party?

Answer 24

1. Out of Court Settlement

2. Judgement up to the policy’s limit of liability

Question 25

If the insured has a liability coverage of $500,000 and the court judgement orders $750,000 — how will the payment be made (who is responsible for how much).

Answer 25

The Insurer pays the damages up the to policy’s limit of liability — $500,000. The additional $250,000 is the responsibility of the insured.

Question 26

What is vicarious liability?

Answer 26

Liability for the acts of another — an employer being responsible for negligent acts of the employees.

Question 27

What is Absolute liability?

Answer 27

Liability involving unusually dangerous activities — if storing chemicals or explosives, have absolute liability for harm cause in these situations.

Question 28

What is strict liability?

Answer 28

Strict liability is negligence held by manufacturers or sellers for a defective or unreasonably dangerous product.