PNC license Chapter 4

Third-Party Insurance

Provide coverage for loss to a third party whom the insured owes a legal obligation.

Third-Party Claimant

Third-Party Claimant: Asserts a claim against the insured.

Tort

A wrongful civil act that violates a duty or rights of another, and the harmed party may seek compensation known as damages. (Does not include criminal acts)

Unintentional Torts

Not caused by a deliberate act but are a result of failing to act as reasonable as someone else would in the same circumstances.

Negligence

is an unintentional tort that is a failure to exercise the degree of carte required by the law to protect others from an unreasonable risk of harm.

Liability insurance provides

coverage for most unintentional torts.

Gross Negligence

Excluded from liability police, it is the failure to exhibit any sort of care through recklessness/being indifferent to wellbeing of others

Intentional Torts

Deliberate acts that are premeditated or planed that harm another. The harmed party is permitted by law to sue the wrongdoer, even if the harm was not necessarily anticipated.

Do liability polices provide coverage for intentional torts?

No.

What are the four elements for an act to be considered negligent?

Legal Duty of Care, Breach of Duty, Proximate Cause, Loss or Damage

Legal Duty of Care

one of the elements to be considered negligent, it is the obligation of provide another party a certain standard of conduct.

Breach of Duty

One of the 4 elements to be negligent, a defendant must have breached the duty of care owed. ex: failing to observe traffic signals breaches duty to drive safely.

Proximate Cause

One of the four elements of negligence. It is the primary cause of loss. The negligent action must be the most important event that resulted in the chain of events that caused the loss. If the chain is broken, or the action is not the primary cause, it is not negligence.

Loss or Damage

The last element for negligence. The claimant must suffer a real/substantial injury to collect under a liability claim based on negligence. The loss must be a reasonably consequence of the Proximate Cause.

What are the defenses for a defendant-insured?

Common Law Defenses and Contributory Negligence and Assumption of Risk, Last Clear Chance, Intervening Cause, Act of God/Act of Nature, Sudden Emergency

Common Law Defense

Based on judicial or court decisions

Contributory Negligence

Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. Not all states allow this defense.

Assumption of Risk

Prevents recovery if the claimant knowingly assumed a risk, thus eliminating the defendant’s duty of care.

Last Clear Chance

If both claimant and defendant contributed to the injury, either party can argue that the other had the last clear opportunity to avoid the accident.

Intervening Cause

Prevents/Limits recovery from the wrongdoer when a distinctly separate negligent act occurs after the original act but before damages occurs. It must be unexpected and unforeseen

Act of God/Act of Nature

Produced bya physical cause of nature and not within human control, the defendant cannot be held liable. Argues it was resulted from unforeseeable cause and not by an action

Sudden Emergency

Defendant cannot be held liable if they were acting with reasonable care and then experienced a sudden, unforeseeable medical emergency that prevented them from acting with the same care. (Ex: heart-attack while driving)

Statutory Defenses

Based on Legislation

Comparative Negligence

A claimant who is partially negligent is still entitled to damages but damages are reduced in proportion to the claimant’s negligence. Most states have a percentage where the claimants negligence will bar recovery.

Stature of Limitations

The length of time during which the legal proceedings may be initiated, set by either state or federal laws, usually beginning tghe day an event occurs. If legal action is broguth AFTER this time period is over, the claimaint is not able to recover damages.

What are Damages in insurance?

Amounts paid by order of a court as compensation to an injured claimant. There are two categories of damages: Compensatory and Punitive.

Compensatory Damages

Awarded to an injured party to compensate for an actual sustained loss. They may be granted as special or general

Special Damages

Awarded to an injured party for tangible and known expenses. These are specific amounts that are unique to the claimant, such as bills or loss of earnings.

General Damages

Awarded to compensate for noneconomic losses that are difficult to calculate. Ex: Pain, suffering, mental anguish

Punitive Damages

In some cases, the law will allow damages to be awarded in order to punish and discourage a wrongdoer from repeating the negligent acts or missions.

Do most Liability policies cover punitive damages?

No.

What does Casualty Insurance protect the insured from?

Protects Insured when they are held legally liable for injury and damages. Can be criminal or civil.

Is legal liability the same as negligence?

No. There may be circumstances in which an insured is liable for damages, without first having to determine who was at fault for the accident or occurrence.

Strict Liability

Used in the context of manufacture of a product who is liable for all damages caused by defective product without regard to fault or negligence. Applying the concept helps improve the quality of products because the business knows they would be liable if they sold defective products.

Absolute Liability

Often associated with dangerous animal ownership, storage of firearms or flammable material. Also associated with employer’s liability when an employee is injured at work.

Can Strict Liability and Absolute Liability be used interchangeably?

Yes, but they tend to be used in different contexts.

Attractive Nuisance

An artificial condition on the land that attracts children such as a swimming pool or swing set. Even if a child is injured and they were uninvited, the property owner may be held absolutely liable for injuries.

Vicarious Liability

Negligence is not directly attributable to the person whom the claim is made against, but that person is responsible for the acts of the negligent party.

Respondent Superior

Vicarious Liability in an employer-employee relationship

Bodily Injury Liability

Refers to physical injury, including sickness/disease/death. Expenses may include medical bills, lost wages, mental anguish/disfigurement

Medical Payments Coverage

Pays for necessary medical, dental and funeral expenses that result for injuries sustained on an insured location or as a result of the insured activities. Payments are made regardless of negligence.

Is Medical Payments Coverage an admission of Liability?

No, they provide a small amount of insurance to help resolve smaller medical expense claims and discourage liability claims and lawsuits.

Property Damage Liability

covers losses arising from physical damage to the tangible property of a third party caused by the acts of the insured. Expenses include the actual cost to repair/replace the damaged property as well as the loss of use cost.

Personal and Advertising Injury Liability

Covers Injuries to a third party that are not bodily or property damage. Refers to the damage of a person’s reputation or emotional well-being.

Limits of Liability Insurance

The maximum a liability policy will pay in the event of loss, regardless of the number of insured, cliams made, lawsuits filed or parties making claims. Certain limits apply to any one loss and other limits may apply to all losses that occur within the policy period.

Per Occurance Limit

Is the most the policy will pay for all losses arising out of any once occurrence, regardless of other policy limits.

Per Person Limit

The most the policy will pay for loss to any one person injured in any one loss, regardless of the other policy limits

Aggregate Limit

The maximum amount the policy will pay for all losses submitted during the police period, regardless of the other policy limits. Especially, it caps the amount of coverage available throughout the entire policy period.

Split Limits

The most the policy will pay for different types of losses that occur as a result of any one loss, regardless of other limits. Often seen in auto insurance.

Combined Single Limit

The most the policy will pay for all losses of all types resulting from any once occurrence regardless of any one occurrence.

Duty to Defend

Most policies stipulate that the insurer has a ____ the insured in court proceedings. Any defense costs incurred by the insurer are covered in addition to the policy limit, meaning those expenses do not reduce the limit of insurance. The insurer’s duty ends when the policy limit has been exhausted by judgements or settlements.

Consent to Settle Provision

Require the insurer to obtain the insured consent before settling a suit.

Supplementary Payments

Payments by the insurer for the costs associated with the investigating and resolving of claims such as premiums on appeal bonds, pre- and post-judgement interest and the insured loss of earnings while assisting the insurer in defending a claim. Always paid in addition to policy limits.

Severability

The insurance provided applies to each insured separately rather then to all insured collectively without increasing the policy limit of liability. Intended to protect the other insured if one insured fails to follow policy conditions. However, all insured are collectively are still bound to the same specified policy limits.

What happens if an insured declares bankruptcy?

The insurer still must follow any duties or obligations under the policy.