Casualty (Liability) Basics

P's liability policy has the following limits: $50,000 per person, $250,000 per occurrence, and $400,000 aggregate. During the policy period, the policy paid out $250,000 in liability claims. If P suffers another loss of $250,000 during the same policy period, how much will the policy pay?

$150,000- Because the policy has an aggregate limit of $400,000 during the policy period, and has already paid out $250,000, the most it will pay for the remainder of the period is $150,000, regardless of the amount of loss.

A liability policy contains a per person bodily injury limit of $25,000 and a per occurrence limit of $50,000. If an accident were to occur and three persons have claims of $20,000 each, the total amount paid is:

$50,000 -The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. Therefore, the limit for this accident is $50,000.

H's liability policy has the following limits: $35,000 per person, $350,000 per occurrence, and $2,000,000 aggregate. This year, three claimants file in the amount $15,000, $30,000, and $45,000. How much will the policy pay?

$80,000- The per person limit prevents the policy from paying any more than $35,000 per person. Therefore, the $15,000 and $30,000 claims will be paid in full, but the $45,000 claim will only be paid up to the per person limit of $35,000.

Policy A provides liability coverage to a Fred's Grocery up to $500,000. Policy B provides coverage for the same risks up to $1.5 million. Both policies pay on a pro rata basis. If Fred's Grocery is determined to have a legal liability of $400,000 to a claimant who was injured on the property, how much will Policy A pay?

100,000 - Pro rata liability requires that each policy pays no more than its share of the loss. The total insured amount carried by Fred's Grocery is $2 million ($500,000 + $1.5 million). Policy A's share of that amount is 25% ($500,000/$2 million). Therefore its share of any loss would be 25% of the loss amount. 25% of $400,000 is $100,000.

Which of the following is true regarding liability insurance?

A liability policy provides coverage for unintentional torts- A liability policy is intended to provide protection in the event the insured's negligence causes bodily injury or property damage to others for which the insured becomes legally obligated to pay damages. Liability is an unintentional tort. Neither intentional torts nor criminal acts are covered by a liability policy.

A ---- is a civil wrong committed by one person against another

A tort

Which of the following would be considered an attractive nuisance?

A trampoline - Attractive nuisances are artificial or uncommon objects that attract children who are too young to realize the possible danger associated with them.

Which of the following defines a tort?

A wrongful act- A tort is a wrongful act (excluding breach of contract). Liability assigned to one party for the conduct of another is vicarious liability. An award to an injured party is called damages. An unforeseen event from which damage results is called an accident.

Which of the following is a legal liability imposed without demonstrated negligence?

Absolute Liability - Because of the high degree of hazard associated with some risks, no degree of care is sufficient to fulfill the responsible party's duty to the public. In such cases, the responsible party is legally liable even when no negligent act is committed. The principle conferring this liability is known as absolute or strict liability.

D's neighbor H keeps a venomous snake as a pet. D's son is bitten after teasing the snake with a stick. After being sued by D's parents, H's insurance company claimed that the boy was acting negligently, and therefore, H was not liable. The boy's lawyer claimed that the pet was so dangerous that it did not relieve the owner of liability, an example of which principle?

Absolute liability- Some activities are so inherently dangerous that they are bound by the principle of Absolute Liability, which states that no degree of care taken by the insured can defend against a charge of negligence. Even though the owner of the snake was not negligent, he/she is still legally liable for the injury.

The _____ is the most the policy will pay for the sum of all the losses occurring within. a policy period.

Aggregate

K gets a horrible rash after using wrinkle - prevention cream for 2 months. This is considered:

An occurrence- is continuous or repeated exposure to the same general harmful conditions.

Proximate cause refers to:

An unbroken chain of events leading to a loss, that were initiated in a negligent act of wrongdoing

Which of the following is not an element of negligence?

Assumption- The elements of negligence are: Duty of care, violation of the duty of care, proximate cause, and damages that are foreseeable. Assumption of risk is a defense against negligence, rather than an element of it.

H's liability policy has the following limits: $25,000 per person, $100,000 per occurrence, and $2,000,000 aggregate. This year, five separate claimants file in the amount $25,000 for injuries suffered in a single accident. How much will the policy pay?

Because all five injuries arose from a single accident, the per-occurrence limit will cap the compensation at $100,000.

Personal Injury includes all of the following, except:

Bodily Injury

Which coverage always contains an occurrence limit?

Bodily injury and property damage

Which of the following statements about liability insurance is false?

Bodily injury includes personal injury is false it includes personal injury.

The _______ limit of liability applies to bodily injury, property damages, or both.

Combined single

When damages are reduced in proportion to the degree of negligence, this is an example of:

Comparative negligence is a defense wherein damages are reduced in proportion to the degree of the claimant's negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages.

Which term describes the equal sharing of a loss by two or more insurers until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first

Contribution by Equal Shares

Which term describes the equal sharing of a loss by two or more insurers until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first.

Contribution by Equal Shares- Under Contribution by Equal Shares, each insurer pays an equal amount to the loss settlement until the loss is paid, or until each insurer has exhausted its limits of insurance, whichever comes first.

Which of the following is a common law defense used by the defendant when the injured party is partially responsible for his own injuries?

Contributory negligence

Property damage covered by a liability policy includes which of the following?

Damage to tangible property, including loss of use of that property caused by the insured's negligence- Liability policies cover legal liability arising from physical damage to tangible property of others, including loss of use of that property, caused by the acts of an insured.

Which of the following relationships involves vicarious liability?

Employer and employee

Which of the following terms includes pain and suffering, disfigurement, and mental anguish?

General damages

Driving while under the influence of alcohol is an example of:

Gross negligence

Which of the following indicates a disrupted chain of events that frees the defendant from liability?

Intervening cause breaks a natural and continuous sequence of events that are necessary to establish negligence.

A chain of events may be broken by which of the following, thus freeing the defendant from liability?

Intervening cause-An intervening cause breaks a natural and continuous sequence of events that are necessary to establish negligence

Which of the following is the best explanation of liability insurance?

It provides protection in the event the insured's negligence causes bodily injury or property damage to others and the insured becomes legally obligated to pay damages

Payment of necessary medical expenses without regard negligence is covered by which of the following insurance coverages?

Medical payments

What type of liability policy requires the injured party to collect benefits from his/her own insurance as if it were first-party coverage, eliminating the process of determining negligence?

No fault

The maximum amount that a coverage will pay for loss to any one injured party regardless of overall policy limits, is known as the:

Per person limit

Which of the following damages is awarded to the injured party for actual medical expense?

Special damadge

The time period in which a lawsuit may be filed after the occurrence of a claim is referred to as:

Statute of limitations- Statute of limitations is the length of time from the date of claim that legal proceedings may be initiated. This time period is established by federal or state law

The type of absolute liability that applies to products is called:

Strict liability- If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective.

In Liability Insurance, which of the following is the maximum amount that the coverage will pay for loss to any one person regardless of overall policy limits?

The Per Person Limit- The Per Person Limit is the amount of coverage available for each person that sustains bodily injuries in an occurrence.

Driver D slid into another car causing an accident in which three people in the other car were injured. Two injured parties claimed $15,000 in medical expenses and the third person claimed $25,000. How much will D's insurance company pay if her policy has 25/50 limits for bodily injury?

The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. -Therefore, the limit for this accident is $50,000.

Each of the following is an element of negligence, except?

There is an intervening cause

A party injured in an auto accident is not allowed to sue the negligent. part who caused the accident under which of the following laws?

no- fault

Which of the following document report how and when a loss happend?

notice of loss

which of the following is designed to prevent the insured from collecting more than the actual extent of loss?

pro rata liability