Chapter 3 Casualty (Liability)

Additional Insured(s)

- A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a liability policy, an additional insured is often a party to an indemnification or hold harmless agreement.

Insured

- A person or organization protected by an insurance contract.

Comparative Negligence

- 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.

Strict Liability Applies to 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. Liability may be asserted even in the absence of negligence. For example, the manufacturer of a dangerous product is always legally liable if the product causes injury or damage

Excess

- If the policy is excess, it makes payment only after all other insurance in place exhausts its limits or denies coverage.

Primary

- If the policy is primary, it makes payment before all other policies in place make payment for a loss.

Intervening Cause

- Prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss. The intervening cause must be unexpected and unforeseen.

Contributory Negligence

- Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant is not permitted to collect damages.

Assumption of Risk

- Prevents recovery if the claimant knowingly assumed the risk.

Pro Rata Liability

- Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss and the method of sharing varies by contract. Some policies require sharing of losses by the ratio of applicable limits of insurance each insurer writes with respect to the total of all limits available for the loss (pro rata). Other policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance (contribution by equal shares).

Statute of Limitations

- The length of time during which legal proceedings may be initiated. This time period is established by federal or state law and usually begins on the day an event occurs.

Per Occurrence Limit

- The most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits. Example: The limit of liability for personal liability on a homeowners policy is a per occurrence limit.

Aggregate Limits

- The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits. -Each loss payment made under a per occurrence limit or per person limit reduces this

Per Person Limit

- The most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits. Example: The limit of liability for medical payments coverage on an auto policy is a per person limit.

First Named Insured

- The name of the person or organization that appears first on the Declarations page of a policy as "named insured."

Named Insured

- The person or organization designated on the Declarations page of the policy as being protected by an insurance contract.

Statutory Law

- Written law enacted by legislatures`

Elements - In order for an act or failure to act to be negligent, it must contain 4 elements:

--- Duty is Owed - Requires the injured party to prove the alleged wrongdoer owed a duty to the injured party or to the public. --- Violation of Duty - Requires the injured party to prove the alleged wrongdoer not only owed a duty but also violated that duty. Basically, the alleged wrongdoer didn't exhibit reasonable care. --- Violation of Duty is Proximate Cause - Requires the injured party to prove the alleged wrongdoer's negligent actions or inactions were the proximate cause of actual injuries or damages. ---Foreseeable Consequence - Requires the injured party to prove the actual injuries or damages were a reasonably foreseeable consequence at the time the negligent action or inaction occurred. ---Note: If any of the four elements is absent, an act, or the failure to act, is not considered negligent.

1st party 2nd party 3rd party who is who

1st party is insured 2nd party is the insurer 3rd party is the claimant

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

A Absolute liability B Proximate cause C Contributory negligence D Comparative negligence C- If the insured can prove that the claimant was negligent to any degree in causing the accident, contributory negligence will prevent recovery of damages by the claimant.

A(n) ____________ is a civil wrong committed by one person against another.

A Breach B Accident C Punitive damage D Tort D- A tort is a wrongful act for which compensation may be sought from the responsible party.

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

A Excess B Combined C Aggregate D Contribution C- Under an aggregate limit, the payment for an accident during a policy period reduces the amount of insurance available for all future accidents that occur for the remainder of the policy period

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

A Excess insurance B Primary coverage C Pro rata liability D Contribution by equal shares C- Pro rata liability is a clause that in the event more than one insurance policy covers a loss, each will pay its share of loss in proportion to the total insurance on the risk.

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

A Limited B Contribution C Excess D Combined Single D- The combined single limit pays for any coverage wherever needed or in any combination.

Which of the following documents informs an insurer that a loss has occurred?

A Notice of loss B Certificate of insurance C Proof of loss D Occurrence notice A- The Notice of Loss is the initial notification to the insurer that a loss has happened. Proof of Loss is a formal statement providing the details necessary for the insurer to determine liability.

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

A Personal Injury Liability B Bodily Injury C Medical Payments D Property Damage C- Medical payments will also pay for surgical, x-ray, dental, ambulance, hospital, nursing, and funeral expenses incurred by a third-party on the insured's premises.

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

A Special B Consortium C Punitive D General A- Special damages are paid for tangible losses and general damages are paid for damages that cannot be objectively calculated, such as pain and suffering.

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

A There is a foreseeable consequence B There is an intervening cause C A duty is owed D The duty is violated B- The fourth element is that the violation of the owed duty is the proximate cause.

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

A Tort B Strict C Civil D No-fault D- Under no-fault, the tort system is abolished and a party who is negligent and causes injury to another does not have to pay for those injuries.

Certificate of Insurance

A document that shows evidence that specific types of insurance were purchased by the insured, at certain limits, and that they were in place on the date the certificate of insurance was issued. A certificate of insurance is not proof of insurance, as a binder is.

Proof of Loss

A formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy.

Liability insurance

A liability policy provides protection for legal liability arising from unintentional torts for bodily injury or property damage to others. Liability insurance is also referred to as third-party insurance because loss payments benefit someone other than the insured. If you recall, the insured is the first party to an insurance contract, the insurer is the second party, and an unknown party that suffers harm is the third party. Three parties are involved in Casualty (liability) insurance

Accident

A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.

Tort

A tort is a wrongful act, other than a breach of contract, that violates a duty or the rights of another and for which compensation may be sought from the responsible party. Torts may result from either criminal or civil activity. Torts are either intentional, or unintentional. An intentional tort is a deliberate act that harms another and for which the injured party is permitted by law to sue the wrongdoer. An unintentional tort, also known as negligence, is an act, or failure to act that is committed without the same level of care a reasonable individual would have exhibited given the same knowledge and set of circumstances. Liability insurance provides coverage for most unintentional torts and excludes intentional torts.

Occurrence

An accident includes continuous or repeated exposure to the same general harmful conditions.

Attractive Nuisance

An artificial condition on land that attracts children, such as a swimming pool, and requires the owner to exhibit a special duty of care. Legally, children are considered invitees to the premises if it contains an attractive nuisance even when they are not expressly invited.

Punitive Damages

An award to an injured party, in addition to compensatory damages, to punish and discourage a wrongdoer from repeating negligent acts or omissions. Most liability policies do not provide coverage for punitive damages.

Compensatory Damages Special damages and General damages

Awarded to the injured party for the actual loss sustained. Damages are Special or General. 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. General Damages are an award to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses. General damages are paid for losses that cannot be calculated objectively and assigned a specific dollar value.

Example of intentional torts

Battery and Trespassing

Loss of Consortium

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

Gross Negligence Gross Negligence

Failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of others. For example, driving while under the influence of alcohol.

Negligence

Failure to use ordinary care. For example, running a red light or drinking coffee while driving a car.

Notice of Loss

Insured must notify the insurer in writing as soon as possible in the event of any loss or occurrence. The written notice should include the named insured, policy number, and details about the time, place, circumstances of the occurrence, and names and addresses of any claimants and witnesses.

Common Law

Law practiced as the result of judicial or court decisions (i.e., case law and precedents).

Property Damage Liability

Legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. Property damage liability expenses include the actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use).

Bodily Injury

Legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured. Bodily injury liability expenses include medical bills, lost wages, mental anguish, pain and suffering, etc.

Personal Injury Liability

Legal liability arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement. Personal injury is generally understood to affect one's reputation or emotional well-being and is not bodily harm or property damage.

Medical Payments Coverage

Medical Payments Coverage -

Other insurance

Other Insurance is a provision that specifies the process to be followed when more than one policy covers the same loss.

Vicarious Liability

The liability assigned to one party for the conduct of another, based solely on a relationship between the two. Examples include employer/employee relationships and parent/child relationships. and businesses for independent contractors.

Combined Single Limit

The most the policy will pay for all losses of all types resulting from any one occurrence, regardless of other limits. For example, the per occurrence limits on homeowners and general liability policies provide coverage for the sum of all bodily injury liability and property damage liability claims that arise from one occurrence.

Split Limit

The most the policy will pay for loss of different types that occur as a result of any one loss, regardless of other limits. For example, the limits of liability on an auto policy for bodily injury might be represented as 100/300/100 ($100,000 is the per person limit for bodily injury liability, $300,000 is the per occurrence limit for bodily injury, and $100,000 is the per occurrence limit for property damage liability).

No-Fault Liability

When a no-fault liability system or law is in place, the injured party collects insurance benefits from his or her own insurance as if it were first-party coverage, thus eliminating the process of determining negligence or legal liability. No-fault laws vary by state and typically apply to auto insurance.

Strict and Absolute liability

a legal principle that imposes legal liability based on conditions, activities, or products that exhibit very high hazards; the degree of care exercised by the insured isn't considered when making a determination of liability.

Absolute liability

is most often associated with dangerous animal ownership, abnormally dangerous activities, and employers liability for injuries sustained by their employees. Dangerous animals include lions, bears, and certain dog breeds such as pit bulls and rottweillers. Absolute liability applies to the storage of explosives, highly flammable material and weapons or firearms.

Example of unintentional torts

texting and driving