Liability

Absolute Liability

1. Absolute Liability - A doctrine that applies only in particular circumstances. It is imposed on those activities that present an extreme likelihood of harm to others when mishaps occur. Employers are absolutely liable for employee work-related injuries.

Tort

A civil or private wrong committed by one person against another, other than breach of contract, for which the law provides a remedy (usually a monetary penalty). Liability usually results from invasion of the rights of others. There are intentional and unintentional torts: a. An intentional tort is a deliberate act or omission, such as assault, battery, trespassing, etc. b. An unintentional tort is the failure to act as a reasonably prudent person would act under similar circumstances resulting in harm to another.

Pro Rata Liability

A clause designed to prevent the insured from collecting more than the actual extent of loss by allowing each policy to pay its share of a loss in the proportion that the coverage of that policy relates to the total of all insurance on the risk. The clause reinforces indemnity. Example: Company A issues a $750,000 liability policy, and Company B issues a $250,000 liability policy for a total of $1,000,000 on a given risk. In the event of a $300,000 liability loss, Company A would pay $225,000 and Company B would pay $75,000.

Intervening Cause

A disrupted chain of events, thus freeing the defendant from liability. Example: Children provoking or teasing a dog, causing it to bite or defend itself.

Certificate of Insurance

A document evidencing the fact that an insurance policy has been written. The Certificate includes the effective date, name of the insurer, name of the insured, and limits of liability.

Proof of Loss

A document that verifies how and when a loss happened and includes the cost of damages.

Proximate Cause

A natural and continuous sequence, unbroken by any efficient intervening cause, that produces injury and without which the result would not have occurred.

Arbitration

A process where a third party settles a disagreement between the claimant and the insurer.

Nonconcurrency

A situation where Liability policies that are in a layered program, such as Primary or Excess policies, do not agree as to their policy effective dates or other policy provisions, creating a gap in coverage.

Accident

A sudden, unforeseen, unintended, and unplanned event. Example: A person slips and falls on a wet floor.

Negligence

A type of tort (civil or private wrong) defined as the failure to act in a reasonable and prudent manner (a prudent person standard or rule) and is usually reprimanded by a monetary penalty. The mere fact that there was an accident does not itself establish a presumption of negligence. The person claiming damages, in almost every instance, must prove the actions of another were the direct or proximate cause of the injury or damages.

Gross Negligence

A willful, wanton, or reckless disregard of the consequences affecting the life or property of another. Example: Operating a vehicle at a high rate of speed in a school zone with children present.

Endorsements

An addition to the policy made by the insurer to broaden coverage, restrict coverage, or further define certain policy provisions.

Occurrence

An event that results in a loss. It includes an accident, but is a broader definition because it includes continuous or repeated exposure to harmful conditions that results in a loss. Example: A person taking blood pressure medicine that over time develops a rash.

Attractive Nuisance

An important exception to the usual liability for injuries to trespassers is in cases of injuries to children. Courts have held that some properties, such as artificial or uncommon objects, attract and are a threat to children because they do not realize the possible danger, yet the court does not expect a child to be able to resist these objects. Example: Swimming pools, ladders, refrigerators with doors left on, trampolines and other kinds of property around a business or home.

Liability Insurance

An unendorsed liability policy provides coverage for unintentional torts. 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. Liability insurance is sometimes referred to as third-party insurance, or as a two-party contract with payments made to a third party. The insured or defendant is the first party, the insurer the second party, and the plaintiff or claimant the third party.

Definitions

Clarifies the policy language and may be found in different places in various policies, depending on how the policy is organized.

Loss of Consortium

Compensation to a husband or wife for the loss of companionship of a spouse.

Specific Damages (a.k.a. Special)

Compensation to an injured party for actual or known expenses such as bills, loss of earnings, or costs of repairing or replacing damaged property. Specific damages do not include pain and suffering.

General Damages

Compensation to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses.

Insuring Agreement (a.k.a. Covered Perils)

Contains information on the coverages provided. The insurer promises to pay those sums for which the insured becomes legally liable for damages caused by an occurrence to which coverage applies.

Comparative Negligence

Damages are reduced in proportion to the degree of negligence. A degree of fault is assigned to both parties. There are different types of Comparative Negligence that may be used in determining the degree of negligence, and statutes vary by state. Any fault on the part of an injured party will defeat their claim under Contributory Negligence, as opposed to Comparative Negligence whereby each party assumes some of the fault.

Punitive Damages

Damages assessed in addition to specific and general damages as a punishment for extreme, objectionable conduct by a negligent party, as in the case of gross negligence.

Business

Includes one's trade, profession, or occupation.

Property Damage Liability

Legal liability arising from damage to tangible property, including loss of use of that property caused by the insured's negligence. Damages might include the actual repair or replacement of the damaged property, as well as loss of rents, income, or revenues sustained because of the damage to the property.

Bodily Injury Liability

Legal liability arising from physical injury to a person, including sickness, disease, and death caused by the negligent or purposeful acts or omissions of an insured. Damages might include medical expenses, lost wages, mental anguish, disfigurement, etc.

Advertising Injury Liability

Legal liability arising from the misappropriation of advertising ideas or style of doing business; infringement of copyright, title or slogan; and oral or written material that violates a person's right to privacy.

Personal Injury Liability

Legal liability arising from the wrongful conduct of the insured resulting in injury other than bodily injury. Example: Libel, slander, false arrest, invasion of privacy, defamation of character, etc.

Actual Loss or Damage

Loss or damage resulting from the real and substantial destruction of property of another or physical injury to another.

Strict Liability (applies to products)

Manufacturers are held strictly liable for damages to others caused by their products. If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective.

Contributory Negligence

Prevents recovery for damages caused by a negligent party if the claimant was also negligent.

Medical Payments Coverage

Provides payment of necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses incurred by invitees and licensees on the insured's premises. These payments are made regardless of fault or negligence, and payment is not an admission of fault.

Declarations

Specifies basic information as to who and what is insured, when the policy goes into effect and expires, where and how much coverage is provided, and how much premium is charged.

Exclusions

Specifies the exposures (perils) that are not covered under the policy. The policy may deny coverage for certain persons, locations, or circumstances.

Conditions

Specifies the general rules (obligations) that the insured and insurer have agreed to follow throughout the policy period, such as the insured's responsibilities in the event of a loss.

Additional or Supplementary Coverage

Specifies the insurer's claim-related expenses, including the expenses at the insurer's request, premium on appeal, or bail bonds. These payments are paid in addition to the policy limits.

Split Limit

The amount of coverage is divided between bodily injury and property damage. Example: The Personal Auto Policy, when written on a "split" limit basis, allows distinct limits for bodily injury per accident and separate distinct limits for property damage per accident.

deductibles

The amount of loss retained by the insured. Most Liability policies do not have a retention (deductible).

Property Owner's Obligation

The degree of care owed to different persons varies with the particular circumstances. The 3 general classes of persons that a property owner may or may not have an obligation to protect are: Invitee, Licensee, Trespasser

Standard of Care

The degree of care that a reasonably prudent person should exercise in the same or similar circumstances.

Libel

The dissemination of any written or printed matter tending to unjustly injure a person's reputation.

Vicarious Liability

The imposition of liability on one person for the actionable conduct of another, based solely on a relationship between the 2 persons. The indirect or imputed legal responsibility for acts of another. Example: The liability of an employer for acts of its employees, or the liability of a principal for acts of its agents.

Notice of Loss

The insured must notify the insurer or its producer as soon as practical of any loss. The Notice should be written and include the identity of the policy and the named insured; reasonably available information on the time, place, and circumstances of the occurrence; and names and addresses of any claimants and witnesses.

Statute of Limitations

The length of time in which a person may file suit. Statutes of Limitations can vary by the line or type of liability insurance, and from one state to another.

Restoration of Limit

The limit of the policy is fully reinstated following a covered loss or on a policy anniversary date.

Combined Single Limit

The limit of the policy may be applied to either bodily injury or property damage, wherever needed, or in any combination. Example: The Section II (Liability) limit of a Homeowners Policy can be used all for bodily injury, or all for property damage, or in combination in any one occurrence.

Aggregate Limits

The maximum amount payable for loss (per location and/or per person) from all occurrences within a policy period regardless of the number of separate accidents. Payment under the policy reduces the amount of insurance available to pay additional claims during that policy year. Example: The Commercial Package Policy and Businessowners Policy are written subject to "aggregate" liability limits.

Per Person Limit

The maximum amount that the coverage will pay for loss to any one person regardless of the overall policy limits.

Per Occurrence Limit

The most the coverage will pay for a loss arising out of any 1 occurrence, regardless of overall policy limits.

Legal Duty

The obligation to conform to a certain standard of conduct for the protection of others. When the insured and a third party cannot agree on legal liability, the courts make the final decision.

Slander

The oral dissemination of a falsehood that damages another's reputation.

Assumption of Risk

The plaintiff who consciously exposes himself to danger assumes some risk of possible injury. Example: A river rapids excursion participant.

Limits of Liability

The restriction a Liability policy places on the dollar amount of coverage is called the Limit of Liability. Liability policies specify this limit in the following ways:

Contribution by Equal Shares

Under this concept, when 2 or more insurers' policies cover at the same level (Primary or Excess), each insurer contributes 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. Example: If there are 3 insurers participating, each would pay 33 1/3 percent of the loss; if 4 insurers participating, each would pay 25 percent of the loss; or if 5 insurers participating, each would pay 20 percent of the loss.

Defenses

a. Common Law (judicial or court decisions)

Defenses

b. Statutory Law (enactment of legislatures)