Unit 5 - Business of Casualty Insurance

Question 1

What is casualty insurance?

Answer 1

• Liability coverage of an individual or organization for negligent acts or omisions
• Policy that pays “others” - third party loss
• General term that covers Auto Liability, Commercial General Liability, E&O

Question 2

What is a third party loss?

Answer 2

• First party = insured
• Second party = insurer
• Third party = person harmed by insured

Question 3

Casualty insurance covers what type of liability?

Answer 3

unintentional torts involving negligence

Question 4

What is tort?

Answer 4

a civil wrong that causes someone else to suffer a loss

Question 5

What is negligence?

Answer 5

failure to act or not act reasonably

Question 6

How does one establish negligence?

Answer 6

All of the following 4 factors must be involved:
1. legal duty owned
2. breach of legal duty owned
3. proximate cause
4. damages

Question 7

What are defenses against negligence used by insurers / insurance companies?

Answer 7

1. Contributory negligence
2. Comparative negligence
3. Assumption of risk
4. Intervening cause
5. Statutes of limitations
6. Last clear chance

Question 8

What is contributory negligence doctrine?

Answer 8

if a person contributed to his/her damages in any way, another party cannot be held liable for the damages

Question 9

What is comparative negligence doctrine?

Answer 9

allow a finding of liability to be made even when both parties have contributed to the loss, with an award based on the extent of each party’s negligence

Question 10

What is assumption of risk defense to negligence?

Answer 10

bars or reduces the right to recovery against a negligent third party when he voluntarily or knowingly participated in the dangerous activity that caused his own injury

Question 11

What is intervening cause defense to negligence?

Answer 11

when an independent event affects the chain of events

Question 12

What is the statute of limitations defense to negligence?

Answer 12

certain types of lawsuits must be filed within a specified time of the occurence to be valid under the law

Question 13

What is the last clear chance defense to negligence?

Answer 13

• used in contributory negligence jurisdictions
• a partially negligent person can recover if he is able to show that the defendent had the last opportunity to avoid the accident

Question 14

What is vicarious liability?

Answer 14

when a person may be held responsible for the negligent acts of another person who has direct liability (example: employee and employer)

Question 15

What are damages?

Answer 15

monetary compensation to an injured party

Question 16

What are compensatory damages?

Answer 16

reimburse injured party only for losses that were actually sustained

Question 17

What are two types of compensatory damages?

Answer 17

1. Special damages = all direct expenses involved in a particular loss (medical expenses, lost wages, funeral, cost to repair damaged property). This is called limited tort.
2. General damages = pain and suffering and mental anguish. This is called full tort.

Question 18

What are punitive damages?

Answer 18

• intended to reform/deter the defendent and others from engaging in same conduct
• generally awarded for gross negligence of the defendent

Question 19

Name the three liabilities that liability insurance covers.

Answer 19

1. Bodily injury - medical bills, pain and suffering, death
2. Property damage - cars, buildings, etc.
3. Personal injury - slander, libel, (Generally not insurable, as considered to be “intentional”)

Question 20

What are the limits of liability for a liability insurance policy?

Answer 20

**These limits apply PER OCCURENCE.
1. **Split Limit Liability **- separate limits for bodily injury and property damage.
2. **Single or combined limit policies **- one limit applied to both bodily injury and property damage (in total)
3. Per person limit - limit on per person

Aggregate limit = limit to all losses occuring within one policy period. Renews each year.

Question 21

Are policy limits restored after an occurence?

Answer 21

Yes, policy limit is restored, up until the aggregate amount is reached.
If aggregate limit is reached, it will not renew until policy period is over.

Question 22

BAILED

List the other type of supplementary payments a general liability policy will make?

Answer 22

These are paid IN ADDITION TO the policy limit and do not cost extra.
ACRONYM : BAILED
* Bonds - bail bonds, appeal bonds,
* Aid - first aid
* Interest - prejudgment or postjudgment interest
* Loss of earnings - for court appearances
* Expenses - incurred for investigation of claim
* Defense costs - cost of hiring an attorney to defend

Question 23

What are the duties of the insured after a loss condition in a liability policy?

Answer 23

1. Notify insurance company in writing
2. Forward any notices
3. Assist the company
4. Don’t assume liability without knowledge and consent of insurer