Law and Risk Management Concepts Flashcards
Direct Property Loss
This usually involves damage to the property itself. Common causes include fire, vandalism, theft, wind, and explosion.
Minor Damages
Damages or hazards that need a few days to repair.
Moderate Damages
Damages or hazards that need 1-2 weeks to repair or abatement.
Major Damages
Damages that require partial renovation or abatement of a building.
Severe Damages
Damages or hazards that require total renovation of a building.
Unlikely Frequency
Not likely to occur under normal circumstances (every 5-9+ years.)
Possible Frequency
May occur at some point during the buildings life cycle (every 3-4 years)
Likely Frequency
Expected to occur at some point in time (every 1-2 years)
Highly Likely
Expected to occur regularly under normal circumstances (multiple times within a year)
Indirect Property Loss
This results from direct damage to property causing a temporary or long-term interruption of a business following a fire, hurricane, or other loss. May also lead to a loss of rental income or a tenant cancellation of a lease due to damage on the premises.
Liability
This results from claims alleging that a person suffered some form of injury caused by another party’s negligence. Examples include claims from slip-and-fall incidents, injuries from pollution, landlord defamation of a tenant.
Personnel
This usually involves damage to the property itself.
Loss runs are
a historical record of past losses suffered by a business that are very valuable and critical to measuring loss exposure.
First step in risk management process:
identify floss exposures.
Being a bona fide purchaser of a property at fair market value means that:
you, as a buyer, have no reason to doubt that the seller has good title.
Premises liability is usually attributed to:
the person in possession of the property.
What is the key difference between easements appurtenant and easements in gross:
How they are transferred.
What is a freehold estate?
Life estate.
An ____________ is always attached to the dominant estate, so it is automatically transferred when the dominant or servient property is sold.
easement appurtenant.
The characteristics of a license do not include
the creation of an estate in land.
A fee simple estate is __________, meaning it is transferable.
Alienable
Which of the following is not a right of property ownership?
Taxation
What is true of fee simple estates:
They provide the most legal rights and powers
An easement implied by necessity involves the presumption that a grantor would not convey a portion of his or her property without retaining __________ to allow access to the property that he or she keeps.
an easement.
A __________ easement allows the holder to go onto someone else’s property for a specific purpose.
affirmative
A __________ easement restricts the holder from going onto onto someone else’s property for a specific purpose.
negative.
Recording a document in the public records:
gives legal (constructive) notice of its contents.
Termination
The lease typically allows the landlord to terminate the tenant’s possessory interest in the leased premises upon a tenant’s default.
Eviction
The legal act of expelling a person from real property, most often for a breach of the lease. When a tenant is evicted by the landlord, the tenant is no longer liable to pay rent, unless the lease states otherwise. The landlord can still sue for collection of rental amounts owing under the lease as damages.
Lawsuit and Rent for Damages
A landlord can file a suit for unpaid rent and other damages after or instead of evicting the tenant for failure to comply with the lease terms.
What are the five steps in the risk management process?
identify loss exposure, measure loss exposure, decide on a plan, implement the plan, monitor loss exposures and evaluate the decision making process.
What is direct property loss?
damage caused directly to the property; common causes include fire , vandalism, theft, wind, and explosions.
What is an example of indirect property loss?
loss of business income due to the temporary interruption of a business following a fire or hurricance.
What is an example of liability loss?
a person who trips and falls in the parking lot of your building and files a claim of negligence on your part.
What are four tools used for identifying loss exposures?
using published checklists, making physical inspections of the property, communicating with other employees, and consulting outside experts.
What are three resources where you can likely get published checklists to help identify loss exposures?
major insurance companies, RIMS, the insurance and employee benefits division of the American Management Society.
Is it more important to identify and prepare for the infrequent and severe loss or for the frequent and small loss
the infrequent and severe loss.
Even if you are not in a hurricane zone, if you are evaluating the worst case scenario for a hurricane, what would you focus on?
severity of loss
Why are large businesses more accurate in predicting loss frequency and severity?
Larger businesses can take advantage of the law of large numbers.
What is separation of loss exposures?
Dividing the loss exposure into parts to decrease the severity of loss.
What is a loss prevention program?
A program deigned to prevent a loss from occurring or at least reduce the chance of it occurring.
Why are smaller companies more likely to use insurance as their primary risk financing tool?
a smaller company will transfer loss exposures of any size of great frequency.
What are the factors involved with those companies that can effectively use planned risk retention as a risk financing tool?
the company must be financially strong, the risk being retained should have predictable severity and frequency, the company should have many years of data on relevant losses.
What are three factors that favor the purchase of insurance over risk retention?
Transferring the payment responsibility for sever or unanticipated losses to the insurances company will relieve uncertainty about the business’s ability to finance future losses. Insurance premiums are deductible business expenses that occur on a regular basis and can be budgeted. Companies that deal with ta business on a regular basis may be more confident of the ongoing viability of the business if they can be shown a comprehensive insurance program is in place.
Who has the responsibility for helping a business implement and monitor a loss control program?
Insurance companies
Who has the responsibility for standardizing codes and workforce safety standards as well as enforcing them?
The government
What are the five types of documentation necessary for managing risk?
Property valuations, records of past losses, copies of insurance policies, current and historical records, risk management manual.
How are criminal prosecutions different from civil lawsuits?
Criminal prosecutions are brought by government officers on behalf of the public. Civil lawsuits are usually brought on by a private plaintiff.
Describe compensatory damages
compensatory damages are awarded to compensate the plaintiff for actual harm or loss suffered, and nothing more. Includes payment or reimbursement for medical expenses, for past and future loss of earnings, and for pain and suffering.
Describe nominal damages.
Nominal damages refer to a small or trifling sum awarded to a plaintiff when a tort or breach of contract has been shown but no actual damage or loss has been proven.
Describe punitive damages
a monetary sum awarded to a plaintiff in situations where the defendant has acted in an outrages our extremely egregious manner. They are generally awarded with compensatory damages.
Define intentional tort and the three elements that a plaintiff must prove in order to recover damages.
Is an intentionally committed wrongful act for which the law provides a remedy in the form of action or damages. To prevail and recover damages in a legal action for an intentional tort, the plaintiff must prove each of the followings three elements: an act was committed by the defendant, the defendant intended such act, the act caused the resulting harm to the plaintiff, giving rise to legal liability.
Identify and describe five defenses to intentional torts.
Consent, defense of self and others, defense of property, repossession of property, necessity.
Three elements that must be present for there to be negligence.
The defendant breaches a duty of care owed to the plaintiff, the defendant’s breach of duty of care is the proximate cause of the plaintiffs injury, there are damages to the plaintiff’s person or property as a result.
Under the duty of care, persons owe a duty to avoid subjecting others to what?
Unreasonable risk of injury.
What are traditional duties owed by a building owner to invitees?
warning of dangerous conditions, inspecting the property periodically, keeping the property reasonably safe.
Define contributory negligence, comparative negligence, and assumption of risk
Contributory negligence is behavior by the plaintiff that contributes as a proximate cause of the injury suffered by the plaintiff. Comparative negligence, the plaintiff is not completely barred from recovering damages from the defendant. Damages are based on the defendants percentage of fault. Assumption of risk is a legal defense to negligence based on express or implied assumption by the plaintiff of the risk of injury resulting from the negligent act.
Strict liability extends to what three situations?
Situations involving wild and dangerous animals, commercial suppliers of products, and ultrahazardous activites.
Under premises liability, who is held accountable for an injury to a person entering a property?
The person who is in possession.
Define commercial general liability (CGL) insurance.
liability coverage for protection against claims of negligence involving bodily injury, property damage, or personal and advertising injury that arise out of an occurrence or defense.
If you are the sole owner of a business and your spouse is covered by your commercial general liability insurance, when is the spouse actually covered?
When acting on behalf of the business.
Who is insured under a standard CGL policy covering a partnership or join venture?
you, your partners, and your members, and along with spouses when conducting company business.
Who is insured under a standard CGL policy covering a limited liability partnership?
you, your members, and managers when conducting company business
What is bodily injury?
in commercial general liability insurance, physical injury, sickness, or disease sustained by a person.
As far as owners and managers of commercial property are concerned, what is the most likely cause of bodily injury claims?
the most likely cause of bodily injury claims is a condition on the premises relating to safety, maintenance and upkeep, or general management; probably the most common claim is what is generally known as a slip and fall claim
What are the eight typical exclusions of a CGL policy?
intentional bodily injury or property damage, obligations under workers compensation, bodily injuries to employees or their relatives arising out of and in the course of employment, personal injury for which an insured has assumed liability under contract or agreement, most kinds of pollution claims, claims involving autos, professional liability claims, property damage to your owned or rented property.
What are the six limits found in CGL policy?
for bodily injury and property damage: combined limit of $1M, for personal and advertising injury claims: separate single limit of $1M payable to any thing in any one year, for fire legal liability: there is a limit of $50K for any one loss, for premises medical payments coverage: the limit is $5K per person, the general aggregate limit applies to all of the coverages described in one policy year: $2M, for products and completed operations coverage: $1M for single occurrence and $2M for annual aggregate.
Who are the two categories of people covered as an insured under a standard auto policy?
yourself for any covered vehicle and anyone else using an auto you own.
For insurance purposes, auto insurance will also cover what other vehicles?
trailers and equipment being towed by the insured vehicle
If, during a business errand using their own vehicle, a business’s employee hits another motorist, what insurance will cover the liability?
non-owned automobile liability insurance.
What is the purpose of non-owned and hired automobile liability coverage?
this coverage will protect the business when borrowed, leased, or rented autos are used on its behalf.
What part of auto insurance policy covers broken glass
comprehensive insurance
What are some common exclusions in an automobile insurances policy?
expected property damage, employment related injuries, and mobile equipment injuries.
What is umbrella liability insurance?
Umbrella liability insruance is a catastrophe liability policy that provides excess liability coverage beyond that of underlying liability policies and also provides liability coverage in some situations excluded by the underlying liability policies.
What are the essential elements of a valid contract?
Offer, acceptance, and consideration
What circumstances terminate the power of the offeree to accept a pending offer?
the death or insanity of the offeror
In what instances are contracts related to real estate not required to be in writing in order to satisfy the statute of frauds?
Agreements forming partnerships to trade or otherwise deal with real esate or real estate interests d ono need to be in writing; there may, however, be other statuatory obligations that require a written partnership agreement.
How long can a contract exist without being performed before it must comply wit the requirement of the statue of frauds?
one year.
What does an amendment to a contract change?
An amendment to a contract varies only those terms addressed in the amendment; if the amendment is not accepted, the terms of the original contract still apply
What four circumstances of intent can negate a contract?
Duress, undue influence, mistake, fraud and misrepresentation.
When can the defense of impossibility of performance be raised?
When the promisor commits to doing something that becomes impossible through no fault of his or her own
What is accord and satisfaction?
Accord and satisfaction is a means of discharging contractual duties in which one party owes the other a debt, and performance or accord is substituted for the debtors contractual obligations.
What is novation?
novation is a three-party agreement whereby a new party to a contract is substituted for an old party, either as a promisor or as a promise.
What are the elements required to form a binding amendment or modification to a contract?
The same elements required to form the original contract
What are general damages?
General damages are those that arise directly from a default of a party under contract.
What is meant by restitution?
A remedy to restore the parties to the same status as before the contract was formed.
What are some of the rights of property ownership?
The right to possess property, use the property, sell or give away the property, pledge the property as collateral, and destroy the property.
