1 - K Liability Insurance and Policy

Define: Single limit

A fixed limit for each type of damage

Driving home one night, Jeff runs a red light and crashed into another car, injuring all three passengers: Clair, John, and Richard. Clair suffered $25,000 in injuries, John $45,000, and Richard suffered the most at $62,000. Assuming Jeff's liability policy limits are set at 50 / 150 / 75, how much, if any, will Jeff be required to pay for the passengers' injuries? A. $12,000 B. $62,000 C. $132,000 D. $0

A. $12,000

Strict liability: A. Holds a person liable for his actions regardless of how much care he demonstrates B. Does not hold up in a court of law C. Releases an individual from liability in dealing with dangerous objects D. Holds an individual to a lower level of care

A. Holds a person liable for his actions regardless of how much care he demonstrates

Jim is out turkey hunting on a private ranch when he hears some movement in the brush. Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken a turkey, but has severely injured one of the landowner's calves instead. Jim is responsible for the cost of the calf because he acted with: A. Negligence B. Great care C. Responsibility D. Liability

A. Negligence

Jim has a liability insurance policy with three limits: one for the maximum amount of bodily injury per person, one for the maximum amount of bodily injury for all persons, and one for the maximum amount of property damage. Each of these limits apply to any one occurrence. What type of limits does Jim's policy have? A. Split limits B. Situational limits C. Aggregate limits D. Single limits

A. Split limits

While driving, Sue looks down to adjust the radio and crashes the car into Jane's car, damaging both cars and injuring herself. Which of the following statements applies to Sue? A. Sue is legally liable for the damages to Jane's car B. In order to be indemnified by Sue's insurer, Jane must prove Sue's legal liability in court C. Jane is liable for Sue's injuries D. Sue's liability insurance would cover Sue's injuries

A. Sue is legally liable for the damages to Jane's car

A passenger on a commercial airline flight was injured when the plane crashed due to a mechanical problem. In court, the injured passenger's lawyer could invoke the doctrine of: A. Contributory negligence B. Res Ispa Loquitur C. Comparative negligence D. Assumption of risk

B. Res Ispa Loquitur

ABC Masonry, Inc. has an aggregate liability policy with limits of 100,000 / 300,000. One day, an accident at a construction site leads to $150,000 in damage to public property. Assuming the cause of loss is covered under ABC Masonry's liability policy, how will this claim be paid? A. The insurer pays $100,000; the aggregate limit is still $300,000; and ABC Masonry must pay $50,000 B. The insurer pays $100,000; the aggregate limit is now $200,000; and ABC Masonry must pay $50,000 C. The insurer pays $150,000 and the aggregate limit is still $300,000 D. The insurer pays $150,000 and the aggregate limit is now $200,000

B. The insurer pays $100,000; the aggregate limit is now $200,000; and ABC Masonry must pay $50,000

Vicarious liability _____ negligence. A. Negates B. Transfers C. Causes D. Prevents

B. Transfers

Sarah is playing with a basketball on the stairs at Bob's house. In doing so, she trips, falls, and breaks her leg. She files a claim against Bob's insurance policy for her injuries. The adjuster determines that Sarah was 50% responsible for her own injuries, and therefore should only receive indemnification for 50% of her medical bills. What defense is the adjuster using? A. Contributory negligence B. Third party negligence C. Comparative negligence D. Assumption of risk

C. Comparative negligence

Sam is a claimant seeking damages from XYZ Insurance. The XYZ adjuster comes to meet with Sam to hear the circumstances of her injury. The adjuster determines that Sam played an active role in her own injuries, and therefore XYZ Insurance will pay her nothing at all for her injuries. What defense is the adjuster using? A. No negligence B. Comparative negligence C. Contributory negligence D. Full negligence

C. Contributory negligence

Joe's homeowners policy has a single limit of $150,000 for bodily injury liability coverage. One day, Joe's friend was injured in an accident on Joe's property, and the medical bills came to $15,000, which were covered by Joe's homeowners policy. Which of the following is TRUE? A. Joe's policy still has $150,000 available for bodily injury liability coverage B. Joe's per occurrence limit has been reduced by $15,000, but the aggregate limit is unchanged C. Joe's aggregate limit has been reduced by $15,000, but the occurrence limit is unchanged D. Joe's policy now has a $135,000 available for bodily injury liability coverage

C. Joe's aggregate limit has been reduced by $15,000, but the occurrence limit is unchanged

James owns a masonry business and has a commercial liability policy with the following liability limits: $150,000 per occurrence / $500,000 per policy term. While at a job site, his cement truck's chute cannot reach the pour site, so the operator adds two extra chutes, extending its length. The chute collapses under the weight of the concrete, causing $35,000 in injury to one of the workers. The loss is covered by the policy, and James' insurer pays the claim. What will the new limits be for the remainder of the policy term? A. $115,000 / $500,000 B. $115,000 / $465,000 C. $150,000 / $500,000 D. $150,000 / $465,000

D. $150,000 / $465,000

Which of the following incidents would a liability insurance policy cover? A. A man crashes his car into his own fence B. A fire damages the back bedroom of your house C. The company van is stolen from your warehouse D. A man slips inside a grocery store and injures himself

D. A man slips inside a grocery store and injures himself

Greg has two limits listed on his homeowners policy for liability coverage: one for bodily injury and one for property damage. Each limit applied on a per occurrence basis. What type of limits are these? A. Situational limits B. Split limits C. Aggregate limits D. Single limits

D. Single limits

Define: Negligence

Failure to use a reasonable degree of care that results in injury or damage to another party

What are the three different split limits?

Maximum paid for bodily injury of one person Maximum paid for bodily injury of multiple persons Maximum paid for property damage

Define: Liability policy limits

Maximum payout for each policy

What are the two different aggregate limts?

Maximum payout per occurrence Maximum payout per policy period

Define: Liability insurance

Protects policyholders when they cause damage or injuries to another party

What are the four elements of negligence?

The negligent party had a legal duty to act (or not act) in a prescribed manner Negligent party failed to act accordingly The claimant suffered actual loss or injury due to this action or inaction The loss or injury to the claimant was a direct result of the negligent party's breach of duty

Define: No liability

The policyholder has 0% or, no liability in the damages to a third party

Define: Full liability

The policyholder is 100% at fault for damages to a third party

Define: Partial liability

The third party is responsible for a percentage of his own damages

Define: Vicarious liability

When negligence is transferred from one party to another