Chapter 4 - Casualty (Liability) Insurance Basics Flashcards
(17 cards)
Casualty (Liability) Insurance
Casualty insurance provides protection for legal liability arising from unintentional wrongful acts that cause bodily injury to others or damage to someone else’s property.
***Liability policies are referred to as third-party insurance
Tort
A tort is a wrongful civil act -not including a criminal act or a breach of contract- that violates a duty or the rights of another, and for which the harmed party may seek compensation, known as damages.
***A tort may be unintentional or intentional
Negligence
Negligence is an unintentional tort that is a failure to exercise the degree of care required by the law to protect others from an unreasonable risk of harm.
***Liability insurance provides coverage for most unintentional torts, such as Negligence
Gross Negligence
Gross Negligence is the failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of others.
***Gross Negligence is an unintentional tort that is excluded by the liability policies.
Elements of Negligence
In order for an act or a failure to act to be considered negligent, there must exist these four elements:
1) Legal Duty of Care (the obligation to provide another party a certain standard of conduct)
2) Breach of Duty (Defendant must have breached duty of care owed)
3) Proximate Cause of Loss (The most important event in the chain of events that caused a loss)
4) Loss or Damage (The result is a real and substantial injury or property loss)
***The Loss or Damage must be a reasonably foreseeable consequence of the negligent act.
Contributory Negligence
A contributory negligence defense prevents recovery for damages caused by a negligent party if the claimant (plantiff) was negligent to any extent.
***Not all states allow the use of this defense.
Assumption of Risk
The Assumption of Risk defense prevents recovery if the claimant knowingly assumed a risk, thus weakening or eliminating the defendant’s duty of care.
For example, disregard for a warning sign that was placed for everyone to see.
Last Clear Chance
When both the claimant and the defendant contribute to the injury, either party could argue that either party had the last clear opportunity to avoid the accident.
***May be used as an exception or limitation to contributory negligence laws.
Intervening Cause
The intervening cause defense prevents or limits recovery from the wrongdoer when a distinctly separate negligent act occurs after the original negligent act, but before damage occurs.
***The original act may not be the proximate cause of the injury. The intervening cause must be unexpected and unforeseen.
Act of God or Act of Nature
This defense argues that the loss resulted from an unforeseeable cause (a physical cause of nature and not within human control or intervention), rather than by the defendant’s action.
Sudden Emergency
The defendant cannot be held liable for an injury that was caused when the defendant, who was acting with reasonable care, experienced a sudden, unforeseeable medical emergency that prevented them from continuing to act with the same care.
***An example of this would be if a driver of a car faints and the fainting results in an accident.
Comparative Negligence
In a comparative negligence defense, a claimant who is partially negligent is still entitled to damages but damages are reduced in proportion to the claimant’s negligence.
Statute of Limitations
The statute of limitations is the length of time during which legal proceedings may be initiated, set either by state or federal law, usually beginning the day an event occurs.
***If legal action is brought by the injured claimant after this time period has ended, they are not able to recover damages.
Damages
Damages are the amounts paid by order of a court as compensation to an injured claimant.
***There are two categories of damages: compensatory damages and punitive damages.
Special Damages
Special Damages are awarded to an injured party for tangible and known expenses.
***These are specific amounts that are unique to the claimant, such as bills, loss of earnings, and the costs of repairing or replacing damaged property.
General Damages
General Damages are awarded to compensate for non economic losses that are difficult to calculate and that would be experienced by anyone in similar circumstances.
***Examples of general damages include payments for pain, suffering, mental anguish, disfigurement, and loss of consortium.
Punitive Damages
Punitive Damages are damages that are awarded in addition to compensatory damages in order to punish and discourage the wrongdoer from repeating negligent acts or omissions. They are awarded when the negligent party has acted intentionally or has exhibited gross negligence.
***Most liability policies do not provide coverage for punitive damages.
