Chapter 5: Negligence, Professional Liability, and Insurance Flashcards
LO 5.1 Identify the four elements of a negligence claim
LO 5.1 Identify the four elements of a negligence claim
Negligence
an unintentional, careless act or omission that causes injury to another person or his property
Inadvertent conduct causing injury or damage to other
Only unintentional tort we talk about in this class
Four required elements or ingredients must be
established by the plaintiff to succeed in a negligence action
See Table 5.1 Negligence: The Required Ingredients
A 1) Duty of care is owed to the plaintiff
B 2) Breach of that duty; breach of the standard of care
C 3) Causation
D 4) Damage
LO 5.2 State when a duty of care arises, how it is breached and identify the tests used to determine if a duty is owed or a breach has occurred
LO 5.2 State when a duty of care arises, how it is breached and identify the tests used to determine if a duty is owed or a breach has occurred
A 1) : A Duty to Exercise Care Must Exist
The Test: Was it reasonably foreseeable by the defendant that the conduct complained of could cause harm to the plaintiff (see card m8)
Negligence involves a failure on someone’s part to live up to a duty to be careful to someone else. We do not have a duty to be careful to everyone. The court must determine whether the defendant owed a duty
of care to the plaintiff.
Duty
in a negligence action, an obligation to live up to a reasonable standard
Duty of care
an obligation to take steps to avoid foreseeable harm; an essential element for establishing liability in the tort of negligence
Reasonable foreseeability test
Aka Foreseeable plaintiff test
a test of whether a duty of care is owed, based on what a person should have anticipated would be the consequences of his action
Example: Was texting and driving reasonably foreseeable to cause harm? Yes!
English Anns case created a two stage
test for determining the existence of a duty of care, which include?
The first question to ask is whether there was a degree of neighbourhood or proximity between the parties such that if the person being sued had thought of it she would have realized that her actions posed a risk of
danger to the other
The second set of policy questions probes deeper, providing for exceptions or modifications to the primary test. Was there any reason that the duty should not be imposed? Should the scope of the duty be reduced? Should the class to whom the duty is owed be limited, or should the damages be reduced?
Proximity
nearness in place, time, occurrence, or relation
Misfeasance
wrongful conduct
Nonfeasance
failure to act; such failure is actionable in tort only where there is a specific duty to act, as with a guardian, parent, or lifeguard
2 B: Breach of the Standard of Care
Test: Reasonable Person Test (see card 14)
In a negligence action, once the existence of a duty is established the second issue is whether the defendant demonstrated sufficient care.
How careful need one be to avoid liability? The reasonable person test is used by the court in many areas of law to establish standards of socially
acceptable behaviour.
“What would a reasonably prudent person, in possession of all the facts of the case, have
done in this situation?”
Example: A reasonably prudent person would not text and drive
Reasonable person test
in a negligence action, the judicial standard of socially acceptable behaviour; the standard used to determine the existence of apparent authority of an agent
This is above average
Example: Par in golf is measured for good golfers. A par three may have the average golfer swinging a 4 or 5
LO Explain how both physical and legal causation and
damage are proven (page 659)
LO Explain how both physical and legal causation and
damage are proven
Negligence with no sort of loss to person or property be suffered
When a customer slips and falls on a wet floor in a
store but suffers no injury there is no right to sue, even though the store employees have been careless.
However, if the customer breaks a leg, this
would be a tangible, physical injury that would provide grounds for an action
“But For” Test: Physical Causation
“But For” Test: Physical Causation
“But For” Test definition
a test for causation used in negligence actions to determine whether the injury would have occurred had it not been for the act of the defendant
Example: If the operator of a motor vehicle knowingly drives at night without tail lights, the driver can be said to be careless. However, if the vehicle is involved in a head-on collision, the fact that the tail lights were not operating is irrelevant.
Causation
2 Tests: ‘But For’ and Remoteness Test
the fact of being the cause of something happening
Remoteness Test—Legal Causation
Remoteness Test—Legal Causation
Remoteness test
determining whether the damages were too far removed from the original negligent act; a breaching party is only responsible for reasonably
With remoteness it is the type of injury itself that must have been foreseen
The proximity of the parties is considered when determining if a duty of care is owed.
Second, remoteness is a factor in determining causation.
Thin skull rule
a principle of torts that we take our victims as we find them, even those with unique physical or mental conditions
Take the plaintiff as you find them (Example: Already injured or disabled)
Plaintiff lawyer usually uses this
Crumbling skull rule
a tort law principle that the defendant is not liable for losses that were inevitable; used in conjunction with the thin skull rule
Example: Severe depression prevents speedy recovery
Defendant lawyer usually use this
LO 5.4 Distinguish the defences applicable to the tort of negligence
LO 5.4 Distinguish the defences applicable to the tort of negligence
Voluntary Assumption of Risk
Volenti non fit injuria
Defense to negligence
Historically, where a plaintiff voluntarily assumed the risk of injury this operated as a complete bar to recovery of damages.
An example might be knowingly getting into a car with a drunk driver.
Signing a waiver form at ski hills, gymnastics studio, etc
Contributory negligence
A defense to negligence
a failure to take reasonable care, which contributes to the injury complained of
Example: Not wearing a seatbelt in the car
Last clear chance doctrine
a largely outdated principle of torts that the last person capable of avoiding the accident is wholly responsible
held the person who had the last opportunity to
avoid the accident and failed to do so, completely responsible. These “all or nothing” rules were criticized as being unfair, so most jurisdictions have since adopted a legislated compromise where both parties are held responsible
Illegality (Ex Turpi Causa, non oritur actio)
Defense to negligence, very rare
“an action does not arise from a base cause.” In simple terms, the courts should refuse to entertain a lawsuit brought by a party who engaged in unlawful activity
The home alone defense - aka getting injured while trying to rob a booby trapped home and the robbers try to sue you
Plaintiffs harmed while acting___________may be denied recovery in tort law
illegally or immorally
LO 5.5 Distinguish occupiers’ liability, innkeepers’ liability, strict liability, vicarious liability, and product liability
LO 5.5 Distinguish occupiers’ liability, innkeepers’ liability, strict liability, vicarious liability, and product liability
“no fault” programs
insurance programs compensating people for their injuries whether they were at fault or not
Non-pecuniary damages
damages based on non-monetary factors such as pain and suffering
Occupiers’ Liability
occupiers liability
In common law, people who occupy property have a special obligation to people who are injured on their property.
Note that this obligation rests with the occupier, not the owner; thus, where the property is leased the
duty falls on the tenant, not the landlord
Example: Driveway is frozen, you invite over a bunch of guests, if someone slips you are at fault if you don’t shovel or put down salt or warn people it is slippery
Trespassers are not covered by this
Invitee
a person coming on a property for a business purpose
Licensee
a person on property with permission but for his own purpose
Trespasser
a person who intentionally and without consent or privilege enters another’s property
Occupier definition
**Note it differs
often it is broad enough to include both
the tenant and landlord, with liability being imposed upon the party
responsible for or in control of the premises
Further, that duty to exercise care applies in relation to
In other words, it is not necessary to apply the foreseeability test to establish whether a duty is
owed; instead, the legislation imposes and describes this duty
(1) the condition of the premises,
(2) the activities on the premises
(3) the conduct of third parties on the premises
Innkeepers’ Liability
Only when the damage or loss to a
guest’s property was caused by that guest’s own negligence was the innkeeper relieved of this responsibility
Again, most jurisdictions have
modified this obligation by statute and impose liability only when the innkeeper or his servants are negligent
Strict Liability
liability even in the absence of fault
Vicarious Liability
Vicarious liability is also a form of strict liability in that the employer is being held responsible for the wrongful acts of an employee even though the employer has done nothing wrong
Product Liability
the legal liability of the manufacturer or vendor to compensate buyers, users, and others injured because of product defects
Circumstantial evidence
testimony not based on actual observation or personal knowledge; evidence that leads one to infer the existence of other facts
LO 5.6 Describe the circumstances where professional liability may arise (page 707)
LO 5.6 Describe the circumstances where professional liability may arise
Professional liability
liability owed by persons failing to live up to the standard expected of a reasonable member of a group with special expertise
May be found due to:
1) a breach of contract: Where liability is limited to the client and may be limited to the terms of the contract itself
2) Negligence: Must perform at the standard of a reasonable professional in that field (length of practice is not a consideration). Courts have recognized liability to third parties for negligent misstatement
Liability insurance
insurance covering loss caused by the negligence of oneself or one’s employees
Contracts and liability
Because professionals’ liability is based on the contract with the client, their liability is also restricted to that client. An outsider has no rights under the agreement. Thus, an accountant’s contractual liability for
improperly prepared financial statements is limited to the corporation for which they were prepared. The shareholders and investors have no claim.
But in tort law, the courts are willing to expand liability beyond these immediate (contractual) parties
To Whom Is a Duty Owed?
Today, however, accountants, bankers, lawyers, business consultants, and other professionals giving financial advice may be sued in tort even when their negligent words cause only economic loss.
A. Negligent Misstatement
Initially, liability for negligence was limited to conduct that fell below an acceptable standard of care. Then, in 1963, the House of Lords in the
United Kingdom indicated its willingness to expand this liability to careless words (or negligent statements ) causing economic loss
Negligent statements
misleading, erroneous statements, made without adequate care, that cause a foreseeable plaintiff harm
A prima facie duty arises when
(a) the defendant ought reasonably to have foreseen
that the plaintiff would rely on his representation, and
(b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable
The owner is so obviously negligent they have to prove they were not negligent
Example: being 5x the alcohol limit and driving is obviously bad
To determine if there was “reasonable reliance,” courts will consider whether:
- The defendant had a direct or indirect financial interest in the transaction in respect of which the representation was made;
- The defendant was a professional or someone who possessed a special skill, judgment, or knowledge;
- The advice or information was provided in the course of the defendant’s business;
- The information or advice was given deliberately, and not on a social occasion;
- The information or advice was given in response to a specific inquiry or request
B. Breach of Standard of Care
The standard of care expected from an expert is a little different from that expected from a non-expert. Experts must live up to the standard of a
reasonable person in the circumstances
**The test is that of a reasonable person, not an average person.
There are two problems here:
first, the level of skill they must have, and
second, how they exercise that skill
C. Causation and Reliance
Finally, it should be emphasized that to succeed in any negligence action the plaintiff must show that the negligent conduct (or words) caused the loss.
Fiduciary duty
a duty to act in the best interests of another; such duty may arise between directors and officers and the corporation they serve, between business
associates including senior employees and their employer, between agents and their principals, and between partners, also called utmost good faith
Good faith
Acting with honesty and integrity
Furthermore, any information coming to the fiduciary
because of her position must remain confidential, must not be disclosed, and must not be used by the fiduciary for her own benefit.
Professional associations
organizations empowered to regulate educational qualifications and professional standards for their members; they may also have disciplinary powers over members
Examples: (such as the law society or society of
professional accountants
Errors and omissions insurance
insurance to protect the holder should she cause injury by negligence
Fraud
the tort of intentionally or recklessly misleading another person or making statements without belief in their truth
Breach of trust
misuse of property held in trust for another by a trustee
LO 5.7 Describe four types of insurance businesses commonly need (page 735)
LO 5.7 Describe four types of insurance businesses commonly need
A sound strategy for risk
management:
1) Learn the law
2) reduce the effect of risk by acquiring appropriate insurance
Insurance Companies Act
This statute requires all non-provincial insurance corporations to be registered and sets out the amount of reserves that must be retained to cover eventual claims
Brokers
persons engaged, for a fee, to negotiate a contract for another; a party hired to ascertain an insured’s insurance needs and secure the necessary coverage
Insurance agents
persons acting on behalf of an insurer to handle policies
Adjusters
representatives of the insurer who are charged with investigating and
settling claims after the insured-against event occurs
Types of Insurance
A. Liability Insurance B. Property Insurance C. Business Interruption Insurance D. Life and Health Insurance E. Bonding
A. Liability Insurance
the type of insurance most closely associated with torts
normally designed to cover not only the loss
suffered but also the legal defence and court costs
Note that liability insurance will not cover wilful acts, such as assault, theft, arson, or fraud.
Builder’s risk policy
Part of Liability Insurance
insurance against liability and other forms of loss taking place during the construction process
Professional liability insurance
Part of Liability Insurance
specialty insurance for lawyers, doctors, and other professionals designed to cover risks occurring in their practices
Umbrella liability
Part of Liability Insurance
a package of several kinds of insurance
B. Property Insurance
The predominant form of property insurance covers losses to buildings
and their contents due to fire or other named perils.
Comprehensive policy
Part of Property Insurance
property insurance covering all losses not specifically excluded
Typical
exclusions are acts of war, riots, or illegal activity.
Co-insurance clauses
Part of Property Insurance
requirements that the insured bear some risk
requiring that the
insured parties maintain a certain percentage
C. Business Interruption Insurance
Often a business suffering a loss from a fire will have insurance to cover the property damage, but may have nothing to cover the losses the business suffers during the period it is closed down for repairs
This is here to cover that gap
Business Interruption Insurance
a form of insurance that compensates the insured for continuing expenses incurred while the business is not earning income
providing coverage not only for lost profits but also any additional expenses incurred to bring the business back into production.
D. Life and Health Insurance
Life insurance provides security for a family or business against the death of the insured. Death is inevitable, so premiums are calculated on the basis of a prediction of how long a person of a certain age and health can be expected to live
E. Bonding
While insurance coverage is not generally available for intentionally wrongful acts, such as assault, many businesspeople insist on some protection against losses brought on by their employees or the people
they deal with who may act wrongfully, even wilfully so
Two types of bonding:
1) Fidelity Bond
2) Surety Bond
Fidelity Bond
an employer’s insurance against an employee’s wrongful conduct
Example: If the employee
steals from the employer or a customer, the bonding corporation will compensate the employer for that loss
Surety Bond
insurance arranged in case a party to a contract fails to perform
For example, in a large construction project, the
corporation doing the foundation may be required to put up a performance bond that it will finish the job at a specified level of quality and by a certain time.
Insurable interest
a real and substantial interest in specific property or in someone’s life
That means that when the insured-against event happens, the insured must suffer a loss for which the insurance payout provides compensation and no more.
Example: If Masson owned a half-interest in a
painting worth $150 000, he would have an insurable interest of $75 000.
Limitation Clauses (Exclusion Clauses)
Insurance contracts take a standard fixed form and often contain
limitation clauses favouring the insurer
Contra proferentum rule
a rule of interpretation; ambiguous provisions in a written contract are to
be construed against the party that drafted the agreement
Contract of Utmost Good Faith
LO 5.9 Explain the significance of insurance being a contract of utmost good faith
LO 5.10 Examine the duties imposed by law on the insured and insurer
Subrogation
Subgrogation
the right of the insurer upon payment to take over the rights of the insured in relation to whoever caused the injury
The insurer steps into the shoes of the insured and can then sue whoever caused the loss as if it were the
insured
Basically the insurance company sues the person at fault to make up for losses
Right of salvage
an insurer’s right after paying the insured to sell damaged or recovered goods to recover losses
Forfeiture rule
the principle that a criminal should not be permitted to profit from a crime
that a criminal should not be permitted to profit from a crime)
Social Host liability
Where an individual hosts an event that serves alcohol and can be found responsible if another individual is overserved and that person injures someone
Business host liability
Where a business hosts an event (i.e. Christmas Party or Golf Tournament) that serves alcohol and can be found responsible if an individual is overserved and that person injures someone
D Damage
Test: The actual damage to occur
Types of damages:
General
Special
Punitive (super rare with negligence as its unintentional)
