Ch. 4 - Casualty (Liability) Insurance Basics

General damages are those that: A Compensate an injured party for suffering, loss of consortium, and similar types of losses B Are awarded to the general public rather than to a specific party C Can be documented by objective dollar amounts D Are awarded to the negligent party to punish wrongdoing

A Compensate an injured party for suffering, loss of consortium, and similar types of losses General damages are damages for noneconomic losses that are likely to continue into the future, where it is difficult to put a final figure on the losses.

Which of the following is an example of special damages? A Compensation to an injured party for actual medical expenses and loss of earnings B Compensation to a party for the loss of companionship of a spouse C Damages assessed by the court as a penalty for gross negligence D Compensation for pain, suffering, and disfigurement

A Compensation to an injured party for actual medical expenses and loss of earnings Special damages are an award to an injured party for actual and known expenses such as bills, loss of earnings, and the costs of repairing or replacing damaged property. Special damages are paid for tangible loss or damage.

Which of the following relationships involves vicarious liability? A Teacher and student B Employer and employee C Husband and wife D Wholesaler and retailer

B Employer and employee

Medical expenses and loss of earnings awarded to an injured party are considered: A General damages B Special damages C Punitive damages D Physical damages

B Special damages ___ are awarded to an injured party for actual and known expenses such as medical bills, loss of earnings, and the cost of repairing or replacing damaged property.

An insured has a casualty insurance policy. If the insured becomes insolvent during the policy period, how does the insurer respond to a claim? A The insurer may terminate the policy with proper notice to the insured and deny coverage for the claim B The insurer responds normally, as it is not relieved of its policy obligations C The insurer may immediately transfer the insured's coverage to a residual market D Claims brought after an official declaration of insolvency are no longer covered by the policy

B The insurer responds normally, as it is not relieved of its policy obligations The Bankruptcy condition states that the insured's insolvency or bankruptcy does not relieve the insurer of any duties or obligations under the policy, so the insurer will respond to the claim as usual.

The Insuring Agreement on a liability policy includes information regarding: A The perils not covered by the policy B The insurer's duty to defend the insured when a claimant brings legal action against the insured C The transfer of the insured's rights of recovery to the insurer D The limits of liability to which coverage is subject

B The insurer's duty to defend the insured when a claimant brings legal action against the insured The Insuring Agreement of a casualty insurance policy identifies the liability exposures insured against, and it states the insurer's duty to defend the insured in court proceedings related to coverage

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 D's policy has 25/50 limits for bodily injury? A $75,000 B $45,000 C $50,000 D $55,000

C $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. So, the limit for this accident is $50,000.

Liability insurance is a two-party contract with payments made to which of the following? A The insured B The party of the second part C A third party D The party of the first part

C A third party the insurer will pay those sums owed by the insured to a third party, whom the insured may have negligently damaged by a tort.

Which term describes the maximum amount payable for loss from all occurrences within a policy period? A Per occurrence limit B Single limit C Aggregate limit D Split limit

C Aggregate limit

Proximate cause refers to: A The fact that a wrongdoer could not foresee the consequences of their actions B A second negligent act that interferes with the chain of events leading to a loss C An unbroken chain of events initiated by a negligent act that leads to a loss D The fact that a policy restricts the territory to which coverage applies

C An unbroken chain of events initiated by a negligent act that leads to a loss A proximate cause is any action or inaction leading to a loss in an unbroken chain of events. An intervening cause is a 2nd negligent act that interferes w/ chain of events. If a defendant can prove the existence of an intervening cause, they may be able to build a defense against a claim of negligence.

As used in casualty insurance, bodily injury is best described as: A All financially measurable injuries directly sustained, including libel and false arrest B Any injury resulting in bleeding, bruising, bone fractures, or disfigurement C Physical injury, sickness, or death arising from the negligent acts of an insured D Any injury causing hospitalization, disability, or loss of income

C Physical injury, sickness, or death arising from the negligent acts of an insured Bodily injury liability expenses can include medical bills, lost wages, mental anguish, and pain and suffering.

Which is the best description of punitive damages? A Punitive damages are limited to disfigurement and mental anguish B Punitive damages are assessed in addition to specific damages and are typically covered by insurance policies C Punitive damages are assessed as a punishment for extremely objectionable conduct by a negligent party D Punitive damages are so limited as to be punitive toward the plaintiff

C Punitive damages are assessed as a punishment for extremely objectionable conduct by a negligent party Punitive damages are an award to an injured party, in addition to compensatory damages, intended to discourage a wrongdoer from repeating negligent acts or omissions.

All of the following statements about liability are true, except: A Breach of contract is not considered an act of negligence B The burden of proof is on the injured party to prove that the other party was negligent C An insured may be liable for damages to an injured party, even if they are not deemed negligent D Liability policies pay costs incurred by an insured to sue negligent third parties

D Liability policies pay costs incurred by an insured to sue negligent third parties Liability policies pay the cost to defend the insured against suits by third parties. They do not cover the costs of lawsuits initiated by the insured against negligent third parties. When a claim of negligence is brought, the injured party must prove that all four elements of negligence were present. In some circumstances, a party may be liable for damages to an injured party without having to be found negligent, such as when the insured has absolute liability.

Liability coverage is designed to: A Protect an insured from being sued by an injured party B Cover injuries and damages caused by the insured's intentional and unintentional actions C Permit the insured to countersue the insurer for losses not covered D Protect the insured from the cost of damages for bodily injury and property damage that the insured is legally obligated to pay

D Protect the insured from the cost of damages for bodily injury and property damage that the insured is legally obligated to pay coverage for legal liability arising from unintentional torts for bodily injury or property damage to others caused by an insured. Though insurers will provide a defense for suits against the insured that are relevant to the policy, it does not keep the insured from being sued. Intentional acts that cause harm or damage are not insurable.