Chapter 5: Negligence, Professional Liability, and Insurance

Question 1

LO 5.1 Identify the four elements of a negligence claim

Answer 1

LO 5.1 Identify the four elements of a negligence claim

Question 2

Negligence

Answer 2

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

Question 3

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

Answer 3

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

Question 4

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

Answer 4

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

Question 5

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)

Answer 5

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.

Question 6

Duty

Answer 6

in a negligence action, an obligation to live up to a reasonable standard

Question 7

Duty of care

Answer 7

an obligation to take steps to avoid foreseeable harm; an essential element for establishing liability in the tort of negligence

Question 8

Reasonable foreseeability test

Aka Foreseeable plaintiff test

Answer 8

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!

Question 9

English Anns case created a two stage

test for determining the existence of a duty of care, which include?

Answer 9

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?

Question 10

Proximity

Answer 10

nearness in place, time, occurrence, or relation

Question 11

Misfeasance

Answer 11

wrongful conduct

Question 12

Nonfeasance

Answer 12

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

Question 13

2 B: Breach of the Standard of Care

Test: Reasonable Person Test (see card 14)

Answer 13

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

Question 14

Reasonable person test

Answer 14

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

Question 15

LO Explain how both physical and legal causation and

damage are proven (page 659)

Answer 15

LO Explain how both physical and legal causation and

damage are proven

Question 16

Negligence with no sort of loss to person or property be suffered

Answer 16

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

Question 17

“But For” Test: Physical Causation

Answer 17

“But For” Test: Physical Causation

Question 18

“But For” Test definition

Answer 18

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.

Question 19

Causation

2 Tests: ‘But For’ and Remoteness Test

Answer 19

the fact of being the cause of something happening

Question 20

Remoteness Test—Legal Causation

Answer 20

Remoteness Test—Legal Causation

Question 21

Remoteness test

Answer 21

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.

Question 22

Thin skull rule

Answer 22

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

Question 23

Crumbling skull rule

Answer 23

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

Question 24

LO 5.4 Distinguish the defences applicable to the tort of negligence

Answer 24

LO 5.4 Distinguish the defences applicable to the tort of negligence

Question 25

Voluntary Assumption of Risk

Volenti non fit injuria

Defense to negligence

Answer 25

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

Question 26

Contributory negligence

A defense to negligence

Answer 26

a failure to take reasonable care, which contributes to the injury complained of

Example: Not wearing a seatbelt in the car

Question 27

Last clear chance doctrine

Answer 27

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

Question 28

Illegality (Ex Turpi Causa, non oritur actio)

Defense to negligence, very rare

Answer 28

“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

Question 29

Plaintiffs harmed while acting___________may be denied recovery in tort law

Answer 29

illegally or immorally

Question 30

LO 5.5 Distinguish occupiers’ liability, innkeepers’ liability, strict liability, vicarious liability, and product liability

Answer 30

LO 5.5 Distinguish occupiers’ liability, innkeepers’ liability, strict liability, vicarious liability, and product liability

Question 31

“no fault” programs

Answer 31

insurance programs compensating people for their injuries whether they were at fault or not

Question 32

Non-pecuniary damages

Answer 32

damages based on non-monetary factors such as pain and suffering

Question 33

Occupiers’ Liability

occupiers liability

Answer 33

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

Question 34

Invitee

Answer 34

a person coming on a property for a business purpose

Question 35

Licensee

Answer 35

a person on property with permission but for his own purpose

Question 36

Trespasser

Answer 36

a person who intentionally and without consent or privilege enters another’s property

Question 37

Occupier definition

**Note it differs

Answer 37

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

Question 38

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

Answer 38

(1) the condition of the premises,
(2) the activities on the premises
(3) the conduct of third parties on the premises

Question 39

Innkeepers’ Liability

Answer 39

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

Question 40

Strict Liability

Answer 40

liability even in the absence of fault

Question 41

Vicarious Liability

Answer 41

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

Question 42

Product Liability

Answer 42

the legal liability of the manufacturer or vendor to compensate buyers, users, and others injured because of product defects

Question 43

Circumstantial evidence

Answer 43

testimony not based on actual observation or personal knowledge; evidence that leads one to infer the existence of other facts

Question 44

LO 5.6 Describe the circumstances where professional liability may arise (page 707)

Answer 44

LO 5.6 Describe the circumstances where professional liability may arise

Question 45

Professional liability

Answer 45

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

Question 46

Liability insurance

Answer 46

insurance covering loss caused by the negligence of oneself or one’s employees

Question 47

Contracts and liability

Answer 47

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

Question 48

To Whom Is a Duty Owed?

Answer 48

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.

Question 49

A. Negligent Misstatement

Answer 49

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

Question 50

Negligent statements

Answer 50

misleading, erroneous statements, made without adequate care, that cause a foreseeable plaintiff harm

Question 51

A prima facie duty arises when

Answer 51

(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

Question 52

To determine if there was “reasonable reliance,” courts will consider whether:

Answer 52

1. The defendant had a direct or indirect financial interest in the transaction in respect of which the representation was made;
2. The defendant was a professional or someone who possessed a special skill, judgment, or knowledge;
3. The advice or information was provided in the course of the defendant’s business;
4. The information or advice was given deliberately, and not on a social occasion;
5. The information or advice was given in response to a specific inquiry or request

Question 53

B. Breach of Standard of Care

Answer 53

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.

Question 54

There are two problems here:

Answer 54

first, the level of skill they must have, and

second, how they exercise that skill

Question 55

C. Causation and Reliance

Answer 55

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.

Question 56

Fiduciary duty

Answer 56

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

Question 57

Good faith

Answer 57

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.

Question 58

Professional associations

Answer 58

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

Question 59

Errors and omissions insurance

Answer 59

insurance to protect the holder should she cause injury by negligence

Question 60

Fraud

Answer 60

the tort of intentionally or recklessly misleading another person or making statements without belief in their truth

Question 61

Breach of trust

Answer 61

misuse of property held in trust for another by a trustee

Question 62

LO 5.7 Describe four types of insurance businesses commonly need (page 735)

Answer 62

LO 5.7 Describe four types of insurance businesses commonly need

Question 63

A sound strategy for risk

management:

Answer 63

1) Learn the law

2) reduce the effect of risk by acquiring appropriate insurance

Question 64

Insurance Companies Act

Answer 64

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

Question 65

Brokers

Answer 65

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

Question 66

Insurance agents

Answer 66

persons acting on behalf of an insurer to handle policies

Question 67

Adjusters

Answer 67

representatives of the insurer who are charged with investigating and
settling claims after the insured-against event occurs

Question 68

Types of Insurance

Answer 68

A. Liability Insurance
B. Property Insurance
C. Business Interruption Insurance
D. Life and Health Insurance
E. Bonding

Question 69

A. Liability Insurance

Answer 69

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.

Question 70

Builder’s risk policy

Part of Liability Insurance

Answer 70

insurance against liability and other forms of loss taking place during the construction process

Question 71

Professional liability insurance

Part of Liability Insurance

Answer 71

specialty insurance for lawyers, doctors, and other professionals designed to cover risks occurring in their practices

Question 72

Umbrella liability

Part of Liability Insurance

Answer 72

a package of several kinds of insurance

Question 73

B. Property Insurance

Answer 73

The predominant form of property insurance covers losses to buildings
and their contents due to fire or other named perils.

Question 74

Comprehensive policy

Part of Property Insurance

Answer 74

property insurance covering all losses not specifically excluded

Typical
exclusions are acts of war, riots, or illegal activity.

Question 75

Co-insurance clauses

Part of Property Insurance

Answer 75

requirements that the insured bear some risk

requiring that the
insured parties maintain a certain percentage

Question 76

C. Business Interruption Insurance

Answer 76

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

Question 77

Business Interruption Insurance

Answer 77

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.

Question 78

D. Life and Health Insurance

Answer 78

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

Question 79

E. Bonding

Answer 79

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

Question 80

Two types of bonding:

Answer 80

1) Fidelity Bond

2) Surety Bond

Question 81

Fidelity Bond

Answer 81

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

Question 82

Surety Bond

Answer 82

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.

Question 83

Insurable interest

Answer 83

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.

Question 84

Limitation Clauses (Exclusion Clauses)

Answer 84

Insurance contracts take a standard fixed form and often contain
limitation clauses favouring the insurer

Question 85

Contra proferentum rule

Answer 85

a rule of interpretation; ambiguous provisions in a written contract are to
be construed against the party that drafted the agreement

Question 86

Contract of Utmost Good Faith

Answer 86

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

Question 87

Subrogation

Subgrogation

Answer 87

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

Question 88

Right of salvage

Answer 88

an insurer’s right after paying the insured to sell damaged or recovered goods to recover losses

Question 89

Forfeiture rule

Answer 89

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)

Question 90

Social Host liability

Answer 90

Where an individual hosts an event that serves alcohol and can be found responsible if another individual is overserved and that person injures someone

Question 91

Business host liability

Answer 91

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

Question 92

D Damage

Answer 92

Test: The actual damage to occur

Types of damages:
General
Special
Punitive (super rare with negligence as its unintentional)