Chapter 6 Flashcards
An insured owns a small neighborhood grocery store. During a storm, a piece of the roof falls on the sidewalk. Several people are in the store at the time, but no one is injured. Under the insurance definition of negligence, such an insured would be held:
A) negligent.
B) strictly liable.
C) not legally liable.
D) legally liable.
Answer: C
A person may be held liable for negligent acts if each of the following four elements is present: (1) legal duty to act (or refrain from acting); (2) failure to perform that duty (breach of duty); (3) injury or damage occurs; and (4) the breach of duty caused the injury or accident. No injury or damage occurred, and a person usually is not held legally liable unless all four of these elements are present.
An insured speeds through a residential neighborhood, almost striking several children. Under the insurance definition of negligence, such an insured would be held:
A) negligent.
B) strictly liable.
C) not legally liable.
D) legally liable.
Answer: C
A person may be held liable for negligent acts if each of the following four elements is present: (1) legal duty to act (or refrain from acting); (2) failure to perform that duty (breach of duty); (3) injury or damage occurs; and (4) the breach of duty caused the injury or accident. Although the driver was reckless, no injury or damage occurred, and a person usually is not held legally liable unless all four of these elements are present.
The insured is in a hurry to get to work, fails to stop at a stop sign, speeds through an intersection, and strikes another vehicle. That vehicle hits another car that then jumps a curb and injures a pedestrian. What is the proximate cause of the accident?
A) Failing to stop at a stop sign.
B) Speeding.
C) Failing to avoid an accident.
D) Leaving late for work.
Answer: A
In property and casualty insurance, proximate cause is the effective reason for loss or damage. It involves an unbroken chain of cause and effect between the occurrence of an insured peril or a negligent act and resulting injury or damage. The proximate cause of this loss (failure to stop) sets in motion an unbroken chain of events that leads to several losses (property and physical damage).
A repairperson knowingly uses faulty parts when he repairs a boiler. The court awards special, general, and punitive damages amounting to several million dollars. How will the repairman’s comprehensive general liability policy respond?
A) Special and general damages are covered.
B) Special and punitive damages are covered.
C) Special damages are covered.
D) General damages are covered.
Answer: B
Liability policies cover special damages when there is a cost to repair or replace damaged property. General damages compensate for things such as pain and suffering. If the court feels the individual has caused the loss through negligence, the court may award punitive damages, which are meant to punish the defendant.
A person becomes seriously ill after eating unrefrigerated raw oysters from a street vendor. When the vendor is sued for negligence, what defense might best be used?
A) Immunity.
B) Last clear chance.
C) Assumption of risk.
D) Comparative negligence.
Answer: C
Most reasonable and prudent people would know the potential danger of eating raw seafood. Therefore, it is likely that the vendor would use an assumption of risk defense. Other defenses against negligence are (1) assumption of risk-the injured person knew the dangers involved in the act that resulted in the injury; (2) contributory negligence-the injured party is shown to be negligent in some way in not avoiding harm; (3) comparative negligence-each party is shown to have been negligent to some degree; and (4) last clear chance-a plaintiff is not barred from recovery if the defendant had an opportunity to avoid an accident but failed to do so.
An insured owns a pet lion that is caged on the homeowner’s property. The owner takes great care to warn neighbors of the possible danger by posting signs, fencing the yard, and locking the cage at all times. When a neighbor’s child manages to open the cage and is bitten, what type of liability would apply to the lion owner?
A) Premises liability.
B) Absolute liability.
C) Vicarious liability.
D) Contractual liability.
Answer: B
The law imposes strict or absolute liability for specific situations or activities that pose threats to the safety of others. People who own dangerous animals are held to a higher standard of care. Absolute liability applies when a person is liable for a dangerous condition regardless of the amount of care taken.
Several unsupervised young children wander about your neighborhood. Although you have fenced your yard and pool, they climb both fences and swim in your pool. You’ve called their parents to complain and tell them that you will not be responsible if one of the children is injured or killed. When a child drowns in the pool, what type of liability would apply to you?
A) Premises liability.
B) Strict liability.
C) None, because you have shifted liability to the parents.
D) Vicarious liability.
Answer: B
In general, the only duty (or degree of care) a property owner owes a trespasser (someone who enters the premises without permission) is to refrain from taking steps to harm the trespasser. However, a property owner has a special duty toward young children who may not be responsible for their actions. Young children may be drawn to the swimming pool which is considered an attractive nuisance or something that is man-made and potentially harmful to young children. Most courts would hold the owner strictly liable for any injuries or deaths. Strict liability is liability without fault.
An employee is delivering packages for her employer but is using her own vehicle. The employee hits a pedestrian. The employer may be held liable because of the doctrine of:
A) workers’ compensation.
B) vicarious liability.
C) gross negligence.
D) employer liability.
Answer: B
Vicarious liability means that one person is liable for the negligent behavior of another, such as an employer being liable for the actions of its employee.
Payments for losses that cannot be precisely measured, such as the loss of companionship of spouse from another, are called:
A) general damages.
B) punitive damages.
C) special damages.
D) spousal damages.
Answer: B
General damages, which are payable in additional to special damages, are payments for noneconomic losses or losses that are not normally directly measurable. General damages include pain and suffering, mental anguish, and loss of companionship. Special damages are awarded for out-of-pocket or economic losses such as medical costs, loss of income, or damage to property. When the courts wish to send a message or punish a defendant for prohibited conduct, punitive damages may be ordered. They are usually awarded only when the harm has been caused by gross negligence or malicious intent.
Which one of the following would be classified as a general damage?
A) Lost wages.
B) Pain and suffering.
C) Medical bills.
D) Damaged property.
Answer: B
Compensatory damages compensate an injured party for injuries sustained, nothing more. Their purpose is to make a person whole again in the position that existed before the loss or harm. Compensatory damages are further categorized by: general damages, which necessarily result from the act or omission, such as emotional distress, inconvenience and pain and suffering; and special damages, losses measured in exact sums of money including medical bills, travel expenses for medical care, prescription costs, damaged property, and lost wages.
Which of the following events is NOT considered an occurrence for insurance purposes?
A) Wearing out clothing.
B) Being struck by a falling object.
C) Slipping and falling on icy pavement.
D) Long-term exposure to chemicals.
Answer: A
An occurrence is an accident as well as continuous or repeated exposure to the conditions that results in injury to persons or damage to property. The insured neither expects it nor intends it. Under the situations listed, only the wearing out of clothing is not an occurrence. By wearing the clothes, a person gradually damages or destroys them, resulting in a decline in their value. However, for insurance purposes, this is not a loss because it is the expected or intended consequence of wearing the clothes.
Bob has a liability policy in the amount of 300/500/100. How much coverage does he have per occurrence for property damage liability?
A) $300,000.00
B) $500,000.00
C) $100,000.00
D) $50,000.00
Answer: C
The limits of liability in an insurance policy may be expressed as a split limit. In the example, 300/500/100 indicates that Bob has $300,000 per person and $500,000 per occurrence for bodily injury liability, and $100,000 per occurrence for property damage liability. Limits of liability may also be expressed as a combined single limit, for example $300,000 per occurrence for bodily injury, property damage, or both combined.
An occurrence is best described as something that:
A) may take place over time.
B) is expected.
C) is intentional.
D) happens when no one is present.
Answer: A
An occurrence can refer to an accident or to continuous or repeated exposure to the same conditions, resulting in injury to persons or damage to property that is neither expected nor intended.
What is meant by aggregate limit of liability?
A) The most the insurance company will pay to one person.
B) The most the insurance company will pay for defense costs.
C) The maximum amount payable in any one occurrence.
D) The maximum amount the policy will pay per policy period regardless of the number of claims.
Answer: D
An aggregate limit is a type of policy limit found in liability insurance policies that limits coverage to a specified total amount for all losses occurring within the policy period.
Common exclusions with a liability policy would typically include all of the following EXCEPT:
A) damage to property owned by the insured.
B) injuries or damages caused intentionally by the insured.
C) damage to property in the insured’s care, custody, or control.
D) injuries or damages caused unintentionally by the insured.
Answer: D
The purpose of liability insurance is to protect the insured against financial loss in the event that they become legally obligated to pay the actual damages the insured caused to others, and coverage for injuries or damages caused unintentionally by the insured is included. There are certain items, however, that are excluded. Common exclusions typically include items such as damage to the insured’s property, bodily injury to the insured, damage to property in the insured’s care, custody, and control, and injuries or damages caused intentionally by the insured.
