Chapter 3
Payment of necessary medical expenses without regard to negligence is covered by which of the following insurance coverages? A Medical Payments B Property Damage C Bodily Injury D Personal Injury Liability
A
Personal Injury includes all of the following, except: A Bodily Injury B Slander C Libel D False Arrest
A
Plaintiff K was injured after losing control of his skis on a slope with well-marked signs indicating the degree of difficulty. What legal defense is available to the ski resort to avoid liability for the injury? A Assumption of risk B Comparative negligence C Statute of limitations D Contributory negligence
A
Q runs a stop sign causing an oncoming vehicle to swerve and hit a tree. Q is guilty of: A Negligence B No wrongdoing C Trespassing D A criminal violation
A
The _______ is the most the policy will pay for the sum of all the losses occurring within a policy period. A Aggregate B Excess C Combined D Contribution
A
Which of the following defines a tort? A A wrongful act B Liability assigned to one party for the conduct of another C An award to an injured party D An unforeseen event from which damage results
A
Which of the following is an example of vicarious liability? A An employer's liability for the acts of an employee B The liability of any group of people, acting together C Liability of members of the clergy D The liability of a negligent party whose identity cannot be determined
A
Which of the following is defined as the failure to act in a reasonable and prudent manner? A Negligence B Proximate cause C Legal Duty D Occurrence
A
Which of the following statements best describes the Other Insurance condition on a standard property insurance policy, when two separate property policies provide coverage for the same loss? A Each policy pays its pro rata share of the loss B Each policy pays an equal share C Neither policy will make payment for the loss D One policy pays up to its limits and the other policy pays the balance
A
Which term describes the maximum amount payable for loss from all occurrences within a policy period? A Aggregate limit B Per occurrence limit C Split limit D Single limit
A
Which of the following statements about liability insurance is false? A Loss of consortium means the loss of companionship of a spouse B Bodily injury includes personal injury, sickness and disease C Personal injury includes libel, slander, and false arrest D Property damage includes physical injury to tangible property and loss of use
B
Which of the following statements about medical payments is true? A They apply to all persons, including the insured on the premises for any reason B Payments are made regardless of fault or negligence C They apply to members of amateur athletic teams sponsored by the insured D They apply to all expenses incurred within 5 years of the accident
B
Excess
makes payment only after all other insurance in place exhausts its limits or denies coverage.
Liability Insurance
only provides coverage when the insured is legally liable for causing injuries or damage
Per Occurrence Limit
The most the policy will pay for all losses arising out of any one occurrence, regardless of other policy limits
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.
Aggregate Limits
The most the policy will pay for all losses submitted during the policy period, regardless of other policy limits.
Legal Liability
the responsibility under law or contract for an act or failure to act.
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 No-fault B Strict C Tort D Civil
A
A(n) ____________ is a civil wrong committed by one person against another. A Tort B Punitive damage C Breach D Accident
A
Each of the following is an element of negligence, except: A There is an intervening cause B A duty is owed C The duty is violated D There is a foreseeable consequence
A
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.
Accident
A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.
Subrogation
After an insurer pays a loss, it is granted the insured's rights to seek recovery from the party responsible for the loss. For example, if Bob is legally responsible for injuring Sue in a car accident, Sue's insurance company may seek reimbursement from Bob for the claim payments it made to Sue.
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
Awarded to the injured party for the actual loss sustained. Damages are Special or General.
Loss of Consortium
Compensation to a husband or wife for the loss of companionship of a spouse.
Medical Payments Coverage
Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured's activities. Coverage is provided for the payment of necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses. Payments are made regardless of the insured's negligence. This coverage is provided to discourage liability claims and lawsuits and, when payments are made, are not an admission of liability.
All of the following are true of torts, except: A Negligence is a type of tort B Liability insurance excludes intentional torts C They constitute the basis of a claim by a third party D They must be committed intentionally
D
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.
In order for an act or failure to act to be negligent, it must contain what 4 elements?
Duty is owed, Violation of duty, Violation of Duty is Proximate Cause, and Foreseeable Consequence
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.
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.
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.
Assumption of Risk
Prevents recovery if the claimant knowingly assumed the risk.
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).
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.
Assignment
The owner of a liability policy cannot transfer policy ownership without the insurer's written consent. For example, a business owner cannot sell his business and then transfer ownership of the business' general liability insurance policy to the new owner without the written consent of the insurance company.
Liability is also known as
Third Party Insurance
Defenses
When a claimant accuses an insured of negligence, the insured may use one of several defenses:
Statutory Law
Written law enacted by legislatures.
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.
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.
Which of the following might be considered a negligent act? A Assaulting a neighbor over a boundary dispute B Unintentionally renting a leaky boat to vacationers C Breach of an employment contract D Robbery of a sporting goods store
B
A second negligent act that interferes with the chain of events leading to a loss is known as a(n): A Foreseeable consequence B Intervening cause C Loss of consortium D Tort
B
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? A $400,000 B $150,000 C $50,000 D $250,000
B
The _______ Limit of liability applies to bodily injury, property damages, or both. A Limited B Combined Single C Excess D Contribution
B
The maximum amount payable for all losses within a policy period is known as the: A Per person limit B Aggregate limit C Per occurrence limit D Combined single limit
B
The provision that establishes the method by which coverage will be applied if other insurance applies to the loss, is sometimes called: A The limit of liability provision B The pro rata liability provision C The claim settlement provision D The subrogation provision
B
Which of the following damages is awarded to the injured party for the actual medical expenses incurred? A General B Special C Consortium D Punitive
B
Which of the following is designed to prevent the insured from collecting more than the actual extent of a loss? A Primary coverage B Pro rata liability C Contribution by equal shares D Excess insurance
B
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: A $60,000 B $25,000 C $50,000 D $75,000
C
Bodily Injury may include which of the following? A False Arrest B Invasion of Privacy C Loss of Earnings D Slander
C
If the amount of liability insurance coverage is divided between bodily injury and property damage claims, the policy limits are which of the following? A Per Person Limits B Per Occurrence C Split Limits D Combined
C
The formal statement an insured provides to an insurer, including all the details an insurer needs to assess its liability following a loss, is known as a: A Binder B Certificate of Insurance C Proof of loss D Notice of loss
C
The person specifically designated in the policy as the person with whom the contract of insurance has been made, is considered to be the: A Additional Insured B Contingent Insured C Named Insured D Contract Insured
C
Which of the following documents informs an insurer that a loss has occurred? A Occurrence notice B Certificate of insurance C Notice of loss D Proof of loss
C
___________ damages are ordered by the courts to punish a negligent party. A General B Special C Punitive D Specific
C
B has two policies on a property. Policy A is for $20,000; Policy B is for $40,000. If Policy A has a pro rata provision, how much will it pay for a covered loss of $15,000? A $10,000 B $5,000 C $7,500 D $15,000
C because The total amount of coverage is $60,000. Policy A provides 1/3 of that total, so Policy A's pro rata contribution would be one-third, or $5,000. Policy B provides $40,000, or 2/3 of the total coverage, so Policy B pays two-thirds.
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? A Assumption of risk B Respondeat Superior C Last clear chance D Absolute liability
D
The person specifically designated in the policy as the person with whom the contract of insurance has been made, is considered to be the: A Contract Insured B Contingent Insured C Additional Insured D Named Insured
D
Which coverage is written with a per occurrence limit? A Strict liability B Advertising injury C Personal injury D Bodily injury and property damage
D
Which description applies to General Damages? A Those damages that can be documented B General Damages include punitive damages C Damages to the general public rather than to a specific party D Compensation to an injured party for pain, suffering, mental anguish, disfigurement and similar types of losses
D
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 Comparative negligence D Contributory negligence
D
Which of the following is true regarding a negligence claim? A In every accident there is one or more negligent parties B An uninjured party to an accident is presumed to be negligent C Every accident resulting in bodily injury or property damage is due to a negligent act D The claimant must demonstrate that the wrongful actions of the insured were the direct or proximate cause of the claimed injury or damages
D
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.
Common Law
Law practiced as the result of judicial or court decisions (i.e., case law and precedents).
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.
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.
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.