Chapter 8 - Canadian Legal System

Question 1

Tort Law

Answer 1

This is where one party believes they were “wronged” by another party. This is insurable (subject to certain rules).

Tort Law is the framework of Liability Insurance.

A Tort is a wrong done to another in breach of a duty laid down by law.

A person who commits a wrong is referred to in law as a Tort-Feasor.

Two or more parties act together to cause injury or damage they are called Joint Tort-Feasors.

Question 2

Tort-Feasor

Answer 2

A person who commits a wrong is referred to in law as a Tort-Feasor.

Question 3

Intentional Torts

Answer 3

Liability Insurance does not deal with Intentional Torts.

Question 4

Tort Comprises

Answer 4

1. Legal Duty Owed
2. Duty is Breached
3. Damages were suffered as a proximate result of the defendant’s (tort-feasor) action

Question 5

Onus of Proof

Answer 5

Like criminal law, one is innocent until proven guilty. Therefore, proof the act occurred by the defendant, or individual being accused, must be presented by the plaintiff, or accuser.

Question 6

Onus of Proof - Defending

Answer 6

Under 3 circumstances, the burden rests with the defendant to show they are NOT guilty.

These circumstances are;

Statute Law, Statutes created by provincial and federal governments may impose strict liability. The provincial Highway Traffic Acts (concerning vehicular accidents involving pedestrians) normally assume the defendant is guilty unless proven innocent.

Res ipsa loquitur (“The thing speaks for itself”)- If a car parked next to a building being spray painted is covered in paint at the end of the day, the painters would have to prove they did not cause the damage.

Strict Liability. Certain activities have been determined by legislation or common law to create liability without regard to fault. These are normally activities in which harm to others would result if a mishap occurred. The person undertaking the activity is in a better position to understand the potential dangers, and it is reasonable to hold that person strictly accountable if someone is harmed. Examples of strict liability include keeping a dangerous or wild animal, storing excessive amounts of flammables or noxious substances in a populated area, or allowing the spread of an intentionally set fire.

Question 7

Civil Law

Answer 7

Tort Law

Contract Law

Question 8

ELEMENTS OF A TORT

Answer 8

Legal duty owed:

This element presupposes that one party has the right not to be harmed unreasonably and the other party has a duty to refrain from causing harm. This must be a non-contractual right, otherwise it would place the situation within the area of contract law. The defendant (the tort-feasor) owed the plaintiff (the injured party) a legal duty.

That duty is breached:

There must be a violation of the right to be free from harm or a breach of the duty not to harm.

Damages were suffered as a proximate result of the defendant’s (tort-feasor’s) action:

There must be some injury or damage caused to the person having the right to be free from harm. The proximate clause rule states there must be an uninterrupted unfolding of events, without the introduction of another primary cause from the initial act to its conclusion.17

Question 9

Negligence

Answer 9

the omission to do something which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something which a reasonable and prudent man would not do.”18

A person is negligent only if the results of the act, or failure to act, could have reasonably been expected or foreseen — that is, if they knew or should have known that their conduct involved an unreasonable risk of harm. Lighting a fire outside on a windy day with a fire ban in place would constitute an expected unreasonable risk.20

Question 10

Trespasser

Answer 10

No duty, but cannot set traps or intentionally cause harm to the trespasser

Question 11

Visitor (applicable to Ontario)

Answer 11

licensee” and “invitee,” classifying them within the heading of “visitor.”

who enters the premises other than a trespasser.

Question 12

Children:

Answer 12

In common law, the accepted legal position is that children lack the mature judgment needed to avoid risk and therefore need to be protected. Certain property, such as construction sites, attract children by their very nature. This is often referred to as an “attractive nuisance” or an “allurement.”

Question 13

Persons Outside the Premises

Answer 13

Neighbours and passers-by can sustain injury or damage as a result of the condition of the occupier’s premises or the activities conducted inside. If property is used in a normal manner, occupiers are expected to maintain their buildings and land to avoid the escape of water, sewage, or other obnoxious matter to the detriment of neighbours. Occupiers who bring dangerous items onto their property and allow them to escape could be held strictly liable for damage or injury to others.

Question 14

Domestic Animals

Answer 14

A large number of claims for injury or damage caused by domestic animals deal with dogs and, in particular, dog bites to innocent third parties. In 1981, an Ontario court ruling held there is no first free bite, and a dog’s owner is deemed legally liable from the first bite. In some municipalities, certain dog breeds have been deemed dangerous, and this has impacted the rating on some liability insurance policies. Zoos and other parties that keep wild animals shall be held strictly liable for injury or damage inflicted by that animal either on or off premises.

Question 15

Children

Answer 15

The activities of children have been the source of numerous bodily injury and property damage claims. Children playing with matches have been responsible for losses to vacant properties, schools, and other buildings. Their careless use of firearms and motorized recreational vehicles has also resulted in permanent injury and death to playmates, friends, and others. In common law, children are responsible for the bodily injury and property damage they cause, unless it can be proven in the courts they were incapable of understanding the consequences of their actions.

Children are responsible for their own torts. Parents are not generally required to pay for the torts of their children, unless it can be shown there was a:

• Failure to properly supervise and control their child’s activities.
• The injury or damage was caused by a dangerous thing or animal relinquished by the parent to the control of the child.
• The injury or damage was caused by a child acting on the authority of the parent.
• The injury or damage arose out of the duties of employment in the parent’s business.

Question 16

Landlords

Answer 16

In common law, landlords are not responsible for ensuring that a building or land rented to others is fit for the purpose for which it is rented, unless they specifically warrant the fitness for such purpose or conceal any adverse conditions.

Exceptions to this are:

• When a landlord rents furnished premises to a tenant, it is presumed that the premises are fit for the purpose leased at the outset of the tenancy.
• If the landlord has contracted to maintain the premises and fails, after reasonable notice to do so, any injury or damage to property of the tenants is the responsibility of the landlord. In buildings having multiple tenancies, the landlord is responsible for maintaining the condition of the areas common to all tenants, including roof, stairways, parking areas, and lobbies.

Question 17

Tenants to Landlord

Answer 17

A business which operates out of rented premises faces the potential for liability for loss or damage to the building. The tenant’s responsibility for such loss may be addressed in:

• Tort law: If a tenant is liable in tort for damage caused, the building owner is entitled to compensation. For example, when damage arises out of the tenant’s negligence, the tenant will be liable to the landlord for damages.
• Contract law: In most instances, the extent of a tenant’s liability for loss will be stated in a contract, such as a rental or lease agreement with the building owner.

Question 18

Bailees

Answer 18

A bailee for hire is someone who has the temporary custody of the personal belonging of another for a purpose other than the sale of that item and who is compensated for caring, servicing, or fixing such property. For example, dry cleaners, garages, trucking companies, and delivery firms are all bailees. There is a potential for loss to the property in the bailee’s possession. Under tort law, bailees are required to exercise the same care over the property as would be exercised by others in the same business. They become responsible if that ordinary care is breached by their negligence. Under contract law, that duty of care is assumed under a separate contract.

Question 19

Employers to Employees

Answer 19

In common law, employers are be held liable for the torts of their employees during their employment. This is known as “vicarious liability,” where one party has the indirect legal responsibility for the acts of another.

However, there is an exception when the employee acts outside the scope of their duties. In these situations, there is no liability when an employee delegates any or all of their work without the employer’s consent, when they take time off from their duties to attend to personal matters, or when they use the employer’s property for their own use and cause damage.

Question 20

Independent Contractors

Answer 20

People who hire contractors to do work on their premises will generally be named in a legal action if the work being performed results in injury or damage to others. The status of the person doing the work determines the extent of the owner’s liability when injury or damage results from that work. Generally, occupiers of property are not liable for the negligence of an independent contractor if it can be shown that reasonable care was exercised in the selection of the independent contractor and it was reasonable that the work the independent contractor was engaged to do should have been undertaken. The exceptions are when the work was inherently dangerous; the independent contractor was using defective fixtures, machinery, or equipment supplied by the occupier; or the occupier controlled the manner in which the work was to be done.

Question 21

Joint Liability

Answer 21

When there are two or more tort-feasors, disputes concerning the apportionment of damages could take a long time to resolve and may involve a separate legal action between the tort-feasors themselves. To ensure that the plaintiffs receive the damages awarded to them as soon as possible, the law provides that when equal liability is disputed, each tort-feasor will be held liable for the entire amount of the award. In order that the plaintiff does not receive twice the amount due, the tort-feasors’ insurers would be prompted to each pay 50% of the damages and settle their own concerns between themselves or, if required, through the courts.

Question 22

Insuring Agreement

Answer 22

“The insurer agrees to pay all sums which the insured shall become legally obligated to pay to third parties as compensatory payment for bodily injury or property damage. It must be caused by an occurrence; it must occur during the policy period, and it must take place in the coverage territory.”

Question 23

Pay All Sums Legally Obligated to Pay

Answer 23

It is up to the courts to determine the legal obligation of the insured either in tort or contract as to their obligation to a third party. Though an insured may feel they have a moral obligation to make a payment to an injured third party, the policy will only respond when the insured is responsible. Negligence must be established.

Question 24

To Third Parties

Answer 24

The coverage provided by liability policies is described as third-party coverage. While property insurance policies provide payment directly to the owner of the property lost or damaged, liability policies indemnify the insured for payments to others for which the insured is legally liable. Black’s Law Dictionary defines a third party as “one who is not a party to the agreement or to a transaction but who may have rights therein.”21 If an insured were to slip and injure themselves on their own property, they could not make claim on their own policy.

Question 25

For Compensatory Damages

Answer 25

There are three types of damages classified as compensatory. Each is meant to compensate for the injury or damage caused by the defendant to the plaintiff. The compensation will be assessed in terms of money.

General damages: - interpretation (pain, suffering, reputation, mental
Special damages - quantifiable - medical, rehab, damages
Nominal damages: personal injuries such as libel and slander

Question 26

For Bodily Injury and Property Damage

Answer 26

The definition of “bodily injury” is very broad. It refers to physical injury sustained and associated with external causes. It includes not only physical injury (such as a slip and fall at a residence) but sickness, disease, and death. It can also include personal injury, such as being detained by a store detective on suspicion of shoplifting, or slander or libel.

Damage to property includes the loss of use of that property. When a person’s negligent act causes physical damage to property, the actual costs to repair or replace that property — including additional expenses incurred in continuing to live or do business at another location — can be claimed from that party.

Question 27

Caused by an Occurrence

Answer 27

An occurrence is defined as an event that occurs suddenly and unexpectedly which can be fixed in time, or that occurs over a long period of time. The first part of the definition is straightforward, while the second part refers to “the continuous or repeated exposure to substantially the same general harmful conditions” — for example, repeated exposure to coal dust or asbestos resulting in lung disease such as cancer.

Question 28

During the Policy Period

Answer 28

The insurer will respond to claims occurring during the period the policy was in force.

Question 29

Within the Coverage Territory

Answer 29

In personal lines insurance, the coverage applies worldwide; on a commercial policy, there may be geographical restrictions, such as within Canada or the United States and its territories. When dealing with commercial risks, the broker must ascertain a company’s trading area to ensure the proper coverage.

Question 30

SUPPLEMENTARY PAYMENTS

Answer 30

The limit of insurance provided by the policy for bodily injury and property damage is reserved for the payment of claims. However, there are additional expenses incurred by both the insurers and insured in investigating, settling, and defending a claim. These expenses are provided under a separate insuring agreement known as “supplementary payments.” These are included in all of the liability policies we will be studying and follow from the insuring agreement.

Supplementary payments are extremely important for all insureds. They are usually not limited to any specific amount and, with most policies, they are provided in addition to other coverage limits.

Question 31

Coverage E: Personal Liability.

Answer 31

Personal liability coverage is designed to insure the legal liability of insureds in their role as private citizens while anywhere in the world. Accidental injury or damage caused by insureds — for example, while on holidays; at public meetings; or while shopping, fishing, golfing or playing ball — are included within the kinds of private wrongs insured by this insuring agreement.

Coverage is provided for injury or damage arising out of the ownership, use, or occupancy of all premises insured by this section. The condition of the insured’s premises and the activities conducted on them are major sources of liability claims.

$1,000,000

Question 32

Coverage F: Voluntary Medical Payments.

Answer 32

This insuring agreement provides for the payment of reasonable medical expenses when an insured unintentionally injures another person or if they are accidentally injured while on the insured’s premises. The types of claims for which payment will be made include surgical, dental, hospital, nursing, ambulance service, and funeral expenses.

The insurer agrees to voluntarily make such payment on the insured’s behalf. In other words, there is no requirement that the insured be legally liable for the injury before payment will be made. The payment is limited to the amount shown on the policy and is limited to one year from the date of the accident. Payments are not made when the injured person is covered by a provincial workers’ compensation plan, a hospitalization plan, or other private insurance plan. These payments are provided without regards to fault.

$5,000

Question 33

Coverage G: Voluntary Payment for Damage to Property.

Answer 33

The insurer agrees to make a voluntary payment for property damage which has been unintentionally caused and for which the insured would not be legally liable. It will also reimburse others for the direct property damage caused intentionally by an insured 12 years of age or under.

It does not provide coverage for damage to property the insured or their tenants own or rent, damage to property insured under Section I: Property Coverages, or claims resulting from the loss of use, disappearance, or theft of the property.

$1,000

Question 34

Coverage H: Voluntary Compensation for Residence Employees.

Answer 34

As per the Schedule

Coverage E: Personal Liability provides coverage for the insured’s legal liability for injury or death to a residence employee. However, when such employee is injured or killed through no fault of the insured, there is no coverage. Coverage H is designed to provide residence employees with limited benefits in such situations. (The RIBO Homeowner Policy Booklet contains a schedule of benefits).

These benefits include payment for:

• Loss of life, including funeral expenses.
• Temporary total disability.
• Permanent total disability.
• Injury benefits (weekly indemnity).
• Medical expenses.

The limits payable and the duration of payments vary with each of the above categories. These payments are made voluntarily. However, there is no obligation on the insurer to make payment in the following instances:

• When the residence employee or their representative refuses to accept these benefits.
• When the residence employee sues the insured.

Question 35

Coverage I: Loss Assessment (applicable to condominium unit owners only).

Answer 35

250% of Coverage A1

The insurer will pay an additional amount up to 250% of Coverage A1 for the insured’s share of a special assessment if:

• The assessment is valid under the condominium corporation’s governing rules, and
• The assessment is made necessary by occurrence(s) to which Coverage E: Personal Liability applies.

The insurer will not pay for any part of an assessment made necessary by a deductible in the insurance policy of the condominium corporation.

Question 36

Section II: Liability Coverages Locations as well

Answer 36

Locations

broadens this definition to include other locations, including all premises where the insured maintains a residence, including seasonal or other residences, provided such premises are specifically described on the coverage summary page.

Premises where the insured is residing temporarily or which the insured is using temporarily, as long as they are not the owner of the premises or the lessee or tenant of the premises under any agreement which is longer than 90 consecutive days.

Premises in Canada to be occupied by the insured as their principal residence, from the date they acquire ownership or take possession but not beyond the earliest of:

○30 consecutive days.

○The date the policy expires or is terminated.

○The date upon which specific liability insurance is arranged for such premises.

Individual or family cemetery plots or burial vaults.

• Vacant land in Canada the insured owns or rents, other than farmland.
• Land in Canada where an independent contractor is building a one-, two- or three-family residence to be occupied by the insured.

Question 37

Coverage E Exclusions

Answer 37

Exclusions:

• Liability that the insured has assumed by contract, unless the insured’s legal liability would have applied even if no contract had been in force. However, insurance companies do insure claims made against the insured for the legal liability of other persons in relation to the insured’s premises that have been assumed under a written contract. In other words, the insured cannot voluntarily assume the liability of others and expect their insurer to pay for the injury or damage caused by such persons. And there are exceptions to this rule, as well: for example, when the insured would have been liable anyway or when the liability being assumed is related to the insured’s premises.
• Damage to property owned by an insured. This will be insured under Section I: Property Coverages of the policy.
• Damage to property used, occupied, leased, or rented by or in the care, custody, or control of an insured, except for the unintentional property damage to premises owned by others, or their contents which the insured is using, renting, or has in their custody or control caused by fire, explosion, water damage, or smoke. In this context, “smoke” means due to a sudden, unusual, and faulty operation of any heating or cooking unit in or on the premises, but not smoke from a fireplace. Water damage has the same meaning as under Section I: Property Coverages.
• Damage to personal property or fixtures as a result of work done on them by the insured or anyone on their behalf.
• Bodily injury to the insured or to any person residing in their household other than a residence employee.
• The personal actions of a named insured who does not reside on the premises as described on the coverage summary page.

Question 38

Coverage E Defence, Settlement, Supplementary Payments

Answer 38

The costs insured by this agreement include:

• Cost of defence. The actual legal costs to conduct a defence in a complicated action can total thousands of dollars. This agreement covers those expenses.
• Reasonable expenses incurred by the insured at the insurer’s request to assist in the investigation and defence of the claim, including all bonds as required by the court.
• Court costs assessed against the insured. The court may rule that the insured bears all the costs of both the plaintiff and the defendant.
• Interest from the date the judgment was rendered, but only on the amount which is within the limit of insurance provided by the policy.
• Expenses which the insured has incurred for the emergency medical or surgical treatment to others following an accident or occurrence insured by this form.
• The reasonable expenses — including actual loss of income up to $100 per day — which the insured incurs at the insurer’s request.

Question 39

Coverage E - Obligations

Answer 39

When an accident or occurrence takes place, the insured must promptly give the insured notice (in writing, if requested by the insurer). The notice must include the date, time, place, and circumstances of the accident or occurrence. It must also include the names and addresses of witnesses and potential claimants. Prompt notification allows the insurer to quickly assess the potential for a successful action against the insured. If the insurer believes it necessary, a written report may be required.

This prompt action ensures that the facts of the incident are fresh in everyone’s mind. An inspection of the accident site may reveal facts which might remove or reduce the responsibility for the loss from the insured. It is also important for the insurer to be allowed to interview witnesses as soon as possible to ensure that important details are not forgotten.

The insured must co-operate with the insurer in any legal action, including obtaining witnesses, information, and evidence about the accident or occurrence if the insurer asks the insured. The insured must also immediately send to the insurer legal documents and any other written communication they receive concerning the accident or occurrence. The insured must co-operate fully with the insurer in the preparation of the defence.

It is extremely important that copies of any demands, notices, summonses, or legal papers be forwarded immediately. These documents could allow the insurer to file an objection to the claim with the court.

The insured must not make any unauthorized payments except at their own cost, nor should they assume any obligation or incur expenses other than first aid expenses necessary at the time of the accident. The right to defend and settle rests with the insurer. Any payments an insured may make are an infringement of that right and are prohibited.

Though this is a general description of what to do after an accident, each of the following coverages has its own specific explanation of what to do after an accident or occurrence and should be consulted for clarification.

Question 40

Watercraft and Motorized Vehicles

Answer 40

For any watercraft and motorized vehicles owned by the insured, coverage is automatically provided for bodily injury or property damage arising out of the ownership, use, or operation of the following watercraft and motorized vehicles:

Watercraft, including their attachments, equipped with an outboard motor or motors of not more than 12kW (16 hp) in total when used with or on a single watercraft.

• Watercraft, including their attachments, equipped with any other type of motor of not more than 38KW (50 hp).
• Non-motorized watercraft, including their attachments, not more than 8 metres (26 feet) in length.

Question 41

NON-OWNED WATERCRAFT AND MOTORIZED VEHICLES

Answer 41

Coverage is provided for injury or damage arising out of the use or operation of all non-owned watercraft. As with other property owned, used, occupied, or leased by the insured, there is no coverage for actual damage caused to the watercraft itself.

This is broader coverage than is provided to insureds who own their own watercraft. The logic is that insureds who own certain boats ought to know of their increased liability exposure and will have taken steps to put coverage in place. The same logic cannot be applied to an insured who may use non-owned watercraft. To ensure there are no gaps in coverage, the insurer agrees to cover the insured’s liability for injury or damage arising out of all non-owned watercraft, regardless of their type or size of motor(s).

As broad as the coverage may appear, there are certain watercraft and motorized vehicles that insurers will not insure. There is no coverage for injury or damage arising out of the use or operation of any watercraft or motorized vehicle — whether owned by the insured or not — while it is:

• Used for carrying passengers for compensation.
• Used for business purposes.
• Used in any race or speed test.
• Rented to others.
• Used or operated without the owner’s consent, if the insured is not the owner.

Question 42

Trailers

Answer 42

Coverage is provided for injury or damage arising out of the ownership, use, or operation of any trailer or its equipment, provided such trailer is not attached to, carried on, or being towed by a motorized vehicle subject to motor vehicle registration. For example, injury or damage caused by a camper trailer which rolls off its site at a local campground could be insured by this policy. A house trailer parked beside the residence in the off-season could be used occasionally while parked. The trailer itself would not be covered, but liability arising from its use would be covered. Damage caused to others while the trailer is in motion, and becomes disconnected from a towing vehicle, would fall under the automobile policy.

Question 43

Business and Business Property

Answer 43

Business is defined in the policy as “any continuous or regular pursuit undertaken for financial gain including a trade, profession or occupation.” Business activities of insureds are generally required to be covered under a commercial liability policy.

Although business pursuits or business use of the premises are excluded under Section II: Liability Coverages, there are exceptions. The insurer agrees to provide coverage for liabilities relating to the following business activity scenarios:

• The insured’s personal actions during the course of their trade, profession, or occupation which are not related directly to their trade, profession, or occupation. For example, Cole is an accountant operating out of his home. If a client were to visit for an appointment and happened to be bitten by his dog, Cole would be covered for a claim arising from the dog bite. However, he would not be covered for his actions as an accountant, which would be covered under his professional liability policy.
• The occasional rental to others of the portion of the dwelling usually occupied by the insured as a private residence. If Nav goes to Florida for three months in the winter and rents out her premises while she is away, she would be covered for claims arising out of the dwelling premises.
• The rental to others of a one-, two-, or three-family dwelling usually occupied by the insured as a residence, provided no family unit includes more than two roomers or boarders. The rental of a spare room to one or two students would be covered.
• The rental of space in the insured’s residence to others for incidental office, school, or studio occupancy.
• The rental to others, or the holding for rent, of not more than three car spaces or stalls in garages or stables.
• The temporary or part-time business pursuits of an insured person under the age of 21. This provides coverage for summer lawn cutting, babysitting, or other temporary pursuits

Question 44

Exclusions of Coverage

Answer 44

As we know, exclusions are the norm, and Section II: Liability Coverages is no exception. In addition to the list of exclusions, there is no coverage for claims arising from:

• War, invasion, or act of a foreign enemy.
• Business pursuits or any business use of the premises except as provided under the Business and Business Property section.
• The rendering or failure to render any professional service. The law puts a higher standard of duty on those having specialized skill or knowledge, and persons providing such service should purchase professional liability insurance.
• Bodily injury or property damage caused by any intentional or criminal act or failure to act by:

○Any person insured by this policy, or

○Any other person at the direction of any person insured by this policy.

•Sexual, physical, psychological, or emotional abuse from molestation or harassment, including corporal punishment by, at the direction of, or with the knowledge, of any person insured by this policy, or

○Failure of any person insured by this policy to take steps to prevent sexual, physical, psychological, or emotional abuse, molestation, harassment, or corporal punishment.

• The transmission of communicable disease by any person insured by the policy.
• The ownership, use, or operation of:

○Any aircraft.

○Premises used as an airport or landing facility and all activities related to either.

Question 45

PERSONAL UMBRELLA POLICIES

Answer 45

To be eligible for an umbrella liability policy, insureds must provide the insurer with evidence that they already have existing or primary liability policies in place for any known exposures, such as automobile, watercraft, aviation, or residences.

When there is a claim, the umbrella liability policy will pay only when:

• There is not enough insurance under the primary policy. If the primary policy has a limit of $2 million, this limit must be exhausted before the umbrella policy pays in excess of this limit.
• There is no coverage provided under the primary policy. In this scenario, the umbrella policy will pay as the primary policy, provided it does not contain the same exclusions as the primary policy. This is called the “drop down” feature. In this case, there is a self-insured retention (SIR) amount (which varies from company to company) if this umbrella becomes the primary insurer. This SIR functions as a deductible.

Question 46

Commercial Liability - Product Liability

Answer 46

Generally, a product is anything sold by the insured. Consumers have the right to expect that the goods they purchase will be safe. When their use results in injury or damage, consumers have a right to take legal action against the party that made or sold the defective product. Business liability policies provide coverage for this exposure.

Question 47

Completed operations liability:

Answer 47

When completed work is put to its intended use and injury or damage results, the party responsible for the work may be sued for damages. Appliance repair shops and plumbing, heating, and electrical contractors all have a completed operations liability exposure.

Question 48

Personal and advertising injury liability

Answer 48

Personal and advertising injury means injury, including consequential bodily injury, arising out of one or more of the following offences:

○Libel and slander.

○Malicious persecution.

○Wrongful entry or eviction.

○Invasion of privacy.

○False arrest.

○Detention or imprisonment.

○Unauthorized use of another’s advertising idea.

In an action alleging personal injury, the wronged party may seek damage for extreme humiliation, stress, or other personal injury.

Question 49

The CGL Policy also provides:

Answer 49

Blanket contractual coverage for liability assumed by the insured, such as lease of premises, a side-track agreement, and other agreements.

• Contingent employer’s liability, which protects the insured for bodily injury to employees on whose behalf contributions are made by, or required to be made by, the insured under the provisions of any workers’ compensation law. If the workers’ compensation plan does not respond to a claim, the employer’s liability would respond.
• Owner’s and contractor’s protective liability, which provides the insured with coverage arising from the activities of a general contractor or sub-contractors.

These policies can also be extended by endorsement to include:

• Garage liability, which responds to the exclusion under the CGL Policy for payment for injury or damage to others arising out of the ownership, use, or operation of any automobile. This covers third-party liability for owned and non-owned vehicles and legal liability arising out of damage to customers’ automobiles while under their care, custody, and control.
• Limited environmental liability, which provides coverage for the sudden and accidental discharge, dispersal, release, or escape of pollutants. This coverage is only available on a selective basis.
• Employer’s bodily injury liability, which covers the insured with respect to claims of bodily injury to an employee not covered by workers’ compensation and arising out of and in the course of employment.

Each of the many and varied wordings have definitions and exclusions particular to the wording. It is important to know your client, know the company, and know the wordings!

Question 50

Professional Liability

Answer 50

Although the CGL Policy is broad, it is not designed to insure the special liability needs of professionals — that’s where professional liability insurance comes in. The focus of professional liability policies is to provide payment for damages arising out of the rendering or failure to render professional services.

A professional is someone who possesses or claims to possess the special knowledge and skill necessary to render a professional service. When that knowledge or skill is deficient and financial or other injury results, a claim for damages may be initiated against the professional.

There are two major classes of professionals, including:

1) Those who administer health care, such as doctors, dentists, and pharmacists. Malpractice insurance will cover their legal liability arising out of the rendering or failure to render their professional service.
2) Those who give advice and counselling, such as lawyers, accountants, architects, and insurance and real estate brokers. Professionals having this exposure can buy errors and omissions (E&O) insurance to cover their exposure.

Question 51

Occurrence-based policy form

Answer 51

Occurrence-based Policy, the insurance company that was on the risk at the time the loss occurred will respond to the claim

Question 52

Claims-made policy form

Answer 52

The insurance company that is on the risk at the time the claim is made will respond.

making it hard to determine a fixed date of exposure; but the date of its manifestation as a cancer can be determined. These forms are highly detailed, and you’ll have to study them closely to be fully aware of the difference.

Question 53

Commercial Umbrella Liability

Answer 53

In some cases, the liability policies purchased by the business may not address their complete liability insurance needs. Potential problems include:

• Inadequate limits because the primary insurer denied increased limits due to its own restrictions regarding reinsurance facilities and capacity.
• Inadequate coverage.

In these situations, providing an umbrella liability policy, as well as additional limits and broader policy coverages, can solve these problems. The umbrella policy is designed to respond only after the underlying or primary policy has responded. In the event of inadequate coverage under the primary policy, the insured must pay a deductible or self-insured retention (SIR) for additional coverage. This encourages the insured to buy adequate insurance for obvious liability exposure on the primary policy.

The application for umbrella liability coverage is quite extensive due to the nature of the policy. Furthermore, coverage cannot be bound by the broker — the policy comes into effect only after acceptance by the insurer. It’s also important to note that understanding the exclusions under an umbrella policy is just as important as understanding the exclusions under a primary policy.