Unit 5 Basic of Causalty Insurance Flashcards
What’s the difference between property and casualty?
Me v.s. The Other Guy
Property–covers personal belongings and real property
• Example: If my house burns down,
insurance pays me to rebuild
Casualty–pays the “other guy”
•Example: If the mailman gets bit by my dog, my insurance
company pays the mailman to pay for his medical claims due to my negligence.
What are 3rd Party Losses?
Third-party losses occur when a person claims to have been injured by an insured, or when a person’s property has been damaged by the insured’s actions.
• The first party is the insured.
• The second party is the insurance company legally representing or defending the insured.
• The third party is the “other guy”
What is a tort (civil wrong) and negligence?
A tort is a civil wrong that unfairly causes someone else to suffer loss or harm resulting in legal liability
for the person who commits the tortious act. Liability insurance provides coverage for unintentional torts involving negligence. Negligence is failure to exercise the care that a reasonable person would exercise in like circumstances. It is failure to do (or not do) something that ordinarily should be (or not be done that results in a loss
Unlike a crime, in which the government prosecutes the wrongdoer, torts are a part of civil law and are concerned with the private relationships between people and businesses. If an insured robs a bank, the insured can possibly go to jail. But if an insured is guilty of a tort, the insured can only be made liable
to pay money.
Tort and Negligence
Liability insurance covers
nintentiona forts
• Tort–civil wrong that causes
someone e se to suffer loss
• Negligence–failure to act or not act reasonably
What four factors help determine negligence?
To establish negligence, all of the following four factors must be involved:
1. Legal duty owed
2. Breach of legal duty owed
3. Proximate cause
4. Damages
Elements of Negligence
• Owe a duty
• Breach the duty
• Be the proximate cause
• Damages
• A drunk driver is guilty of a crime but is not guilty of negligence unless it causes
harm to another
Example of establishing negligence
Suppose the insured is driving to work on the highway. The insured receives a phone call on her mobile phone and reaches down to the floor of the car to find it. While reaching for the phone, the insured takes her eyes off the road and swerves into the next lane, hitting the car beside her. We can establish negligence with the following:
- The insured has a legal duty owed to the other drivers on the highway to drive safely and responsibly.
The insured breached her legal duty because she was distracted by the phone call and hit the car next to her.
- The proximate cause of the damage to the other person’s car was the insured by swerving into the next lane. The loss would not have occurred if the insured would have stayed in her lane.
- Lastly, the other person suffered damages the cost to repair the car.
What is contributory and comparative negligence?
A contributory negligence doctrine says that if a person contributed to his/her own damages in any way, another party cannot be held liable for the damages. To establish liability, an individual must show that the other party was negligent and that the individual did not contribute to the loss through any negligence on his own part. Some states retain this system, ruling out liability when there has been contributory negligence. As an example, the insured (Jake) pulls out in front of another car and an accident occurs. The driver of the other car (Linda) wants to be paid for medical bills and damages to her car. Jake argues that the accident was partly caused by the bald tires on Linda’s car which caused her to not stop quickly enough. The judge agrees and finds Linda 30% at fault. Using the argument of contributory negligence, Jake owes Linda nothing because Linda contributed to the cause of the accident.
Comparative negligence laws allow a finding of liability to be made even when both parties have contributed to the loss, with an award based on the extent of each party’s negligence.
Using the previous example, comparative negligence says that Linda would be responsible for 30% of her damages and Jake must pay the other 70%.
Defenses Against Negligence
Defenses Against Negligence
When the other party claims the insured is liable to them for damages, there are several arguments the insured and the insurance company can use to claim no money, or not all of it, is owed.
What is assumption of risk?
Assumption of risk
bars or reduces the right of recovery against a negligent third party when he voluntarily and knowingly participated in the dangerous activity that caused his own injury. This doctrine is frequently associated with injuries incurred during sporting events. The quarterback of a football team can’t expect to be paid for his own injuries caused by a player from the other team who hits him and breaks his arm. The quarterback assumed responsibility by playing in the game.
What is intervening cause?
Intervening cause is when an independent event affects the chain of events.
It may also serve as a defense against liability. If an insured suffers a heart attack while driving and it causes an accident that seriously injures another person, the insured could argue that the heart attack was an unexpected
intervening cause and that he has no liability.
What is statutes of limitations?
(Think must be filed in a specified time frame)
Statutes of limitations laws provide that certain types of lawsuits must be filed within a specified time of the occurrence to be valid under the law. Don’t wait too long to sue if you think someone else is at fault.
What is last clear chance?
The last clear chance is a doctrine that is employed in contributory negligence jurisdictions. Under this doctrine, a partially negligent person can, nonetheless, recover if he is able to show that the defendant had the last opportunity to avoid the accident.
Defenses Against a Claim of
Negligence by Another
Defenses Against a Claim of
Negligence by Another
• Contributory
• comparative
• Assumption of risk
• Statutes of Limitations
• Intervening cause
• Last clear chance
What is absolute(extremely dangerous)or strict liability?
Absolute liability is imposed by law on those participating in certain activities that are considered especially hazardous. Individuals involved in such operations may be held liable for the damages of another, even though the individual tried to be as careful as possible. Absolute liability is most frequently applied to activities involving dangerous materials, hazardous operations, or dangerous
animals.
Suppose Larry keeps seven boa constrictors in a trailer for use in his nightclub act. Despite precautions, one of the reptiles escapes and seriously injures a child. Larry may not have been negligent, but he could still be held responsible by virtue of absolute liability (owning the snakes).
Another term that is sometimes used for absolute liability is strict liability.
Strict liability is usually used in reference to products liability. The injured party does not have to prove negligence when suing a tire manufacturer. The only proof necessary is that the tires were defective and caused the accident.
Absolute/strict-liability without negligence
What is vicarious liability?
(Think -held liable due to someone else)
Vicarious liability is when a person may be held responsible for the negligent acts of another person who has direct liability.
A very common form of vicarious liability involves the relationship between an employer and an employee.
Often, the negligence of an employee can be imputed (charged) to an employer because the employer has control over the employee. For example, a lumber delivery driver may negligently cause an accident that injures two pedestrians. The delivery driver has direct liability, and the employer also becomes responsible for the negligence because the employee was driving a company vehicle and the accident occurred on company time. Parents also have vicarious liability for the activities of their underage children. General contractors, many times, have vicarious liability for the negligent acts of a subcontractor.
Liability for the actions of another
What are types of damages?
Compensatory damages reimburse the injured party only for losses that were actually sustained. There are two types of compensatory damages: special and general.
• Special damages include all direct and specitic expenses involved in a particular loss, such as medical expenses, lost wages, funeral expenses, and the cost to repair or replace damaged property.
• General damages compensate for things such as pain and suffering and mental anguish.
Punitive damages are intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. An individual suffered burn injuries when his car burst into flames during a rearend collision. At the trial, the evidence showed that the vehicle manufacturer had known the probability of such fires from its own previous testing, and an inexpensive design change could have been made to prevent fuel tank fires. The court held that the evidence supported a finding of malice, justifying an award of punitive damages.
Types of Damages
• Compensatory(reimburse)
• Special-provable monetary losses
• General–nonmonetary losses
• Punitive-gross negligence