Insurance and risk management

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Negligence

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Business

350 Terms

1

Negligence

the failure to exercise the required amount of care to prevent injury to others.

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2

Absolute liability (strict liability)

imposed on some parties without regard to fault (refers to legal liability)

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3

Imputed negligence + vicarious liability

the principal is responsible for the acts of his agents

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4

family purpose doctrine

holds parents responsible for the negligent acts of their children

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5

dram shop law

holds the seller of alcoholic beverages liable for drunken patrons

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6

res ipsa loquitur

"the thing speaks for itself" -- some actions so obviously negligent that the law presumes negligence

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7

Legal liability arises from 3 general classes of legal wrongs

crime

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8

Crime

a wrong in which a person intentionally inflicts injury

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9

Torts

legal or civil wrongs committed against people or organizations

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10

Intentional torts

willful acts or the willful failure to act when required to do so that causes injury to someone else

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11

Breach of contract

the lack of performance by a party to another to satisfy a contract that the parties agreed to

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12

proximate cause

a cause that directly caused the loss or suffering so that if the proximate cause didn't happen

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13

Contributory negligence

negligence that is caused by both plaintiff and defendant --> in some states: no awards to plaintiff

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14

Comparative negligence

allows the plaintiff to collect some damages

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15

last clear chance rule

if defendant had a choice to prevent injury

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16

assumption of risk

one assumes risk by engaging in an activity that is inherently risky

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17

three damages awarded for negligence

special damages

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18

special damages

awarded for losses where the financial impact is quantifiable and can be itemized (medical expenses + loss of income)

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19

general damages

losses that cannot be known with certainty or cannot really be compensated with money (pain suffering loss of consortium)

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20

punitive damages

assessed to deter the tortfeasor from committing the act again (for intentional torts)

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21

personal umbrella insurance (excess liability insurance)

provides protection against legal liability that is over and above that provided by auto

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22

Professional liability insurance

for doctors

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23

D & O Insurance

covers directors and officers of insurance companies to protect them from lawsuits of mismanagement etc

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24

Indemnity

the payment of a loss by the insurer to the insured

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25

Actuary

uses statistics and the law of large numbers to determine expected losses and the probability of how much actual losses can deviate from expected losses

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26

----------- expected value of probability distribution

sum of possibility of event happening x possible event (or amount of loss)

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27

3 ways of determining amount of indemnity

actual cash value

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28

fair market value

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29

broad evidence rule

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30

actual cash value

the loss at the time of the loss

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31

(replacement cost or current price - depreciation(decrease in market bc of wear and tear))

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32

. Depreciation is calculated as the age of the item divided by its useful life; doesnt depend on purchase price of item

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33

amount of indemnity

based on actual cash value

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34

Fair market value

the price that a property would fetch in an open market (price that seller + buyer agree on)

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35

replacement cost

current price of a NEW item

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36

depreciation

decrease in market value because of wear and tear

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37

broad evidence rule

uses all relevant factors in determining the cash value for the loss

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38

appraisal

impartial assessment of an item's worth

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39

valued policy

pays face amount for items that are hard to put a price for

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40

replacement cost insurance

pays for the replacement value of the loss

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41

insurable interest

need in order to buy insurance. insured thing must affect you (loss for you)= insurable interest // the insurable interest must exist at the time of the loss.

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42

Subrogation

the right for an insurer to pursue a third party that caused an insurance loss to the insured

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43

if company finds material information was false when a loss occurs

insurance company can deny coverage

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44

Utmost good faith (uberrimae fidei)

complete and total honesty—all statements must be true and all material facts must be revealed; otherwise

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45

Representation

the statements made by the insured on the insurance application

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46

Material Representation

convincing statement made to induce someone to enter into a contract to which the person would not have agreed without that assertion

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47

misrepresentation

A false or misleading statement that

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48

concealment

failure to disclose material information; to deny insurance bc of concealment to prove: 1. the insured knew that the fact was important in regard to the insurance being applied for; 2. there was an intention to defraud insurer

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49

warranty

a promise by the insurance applicant to do certain things or to satisfy certain requirements

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50

affirmative warranty

statement of fact (basically representation)

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51

promissory warranty

promise to do something or that something will be done in a specific way

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52

express warranty

specifically stated in the contract

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53

implied warranty

one that is presumed

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54

insuring agreement (insurance contract)

specifies the risks that are covered

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55

conditions

requirements of the insured

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56

limitations

specify the limits of the policy

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57

exclusions

specify what is not covered by the contract

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58

4 requirements for valid contract

1.offer and acceptance

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59

2.consideration

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60

3.competent parties

and

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61

4.legal purpose.

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62

consideration

the value that the parties to a contract give to each other

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63

binder

temporary contract that can be oral or written that binds the insurance company to the contract immediately until it has a chance to examine the application

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64

parole evidence rule

written policy determinative where there is any conflict between the oral and written agreement

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65

life insurance process

apply; pay 1st premium; receive conditional premium receipt

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66

conditional premium receipt

like a binder

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67

insurability premium receipt

if applicant is insurable according to company's underwriting standards

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68

contract of adhesion

contract drafted by one party and signed by the weaker party

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69

endorsement (rider)

an amendment or addition to the basic policy that allows the policy to be tailored in acceptable ways for individual situations

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70

Case law to benefit insured(insurance contracts not negotiable) 1

if the terms of a contract are not specific

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71

principle of reasonable expectations

requires that any exclusion or other qualification be conspicuous (clear to see); otherwise

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72

unilateral contracts (insurance)

only the insurer makes a legally enforceable promise to pay for covered losses

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73

bilateral contracts

the promises that each party makes are enforceable by the other party through legal proceedings

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74

commutatie contacts

the amount of consideration given by both parties are usually fairly equal; (most non-insurance contracts are this)

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75

conditional contracts (insurance)

if the insured fails to pay the premium

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76

aleatory contracts

characterized by unequal consideration // insurance company only has to pay if certain events occur // (noninsurance is equal consideration)

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77

indemnity contracts

insurance company is only required to compensate for actual losses

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78

breach of contract

If the insured fails to perform these duties or satisfy these conditions

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79

condition precedent

either a condition that must be satisfied or something that the insured must do before or when a loss occurs and before the insurer will perform

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80

condition subsequent

a condition that must be fulfilled after an event that required an act by the insurer

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81

waiting period

of 1 or more months

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82

recission

can be ended by mutual agreement

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83

incontestable clause

prevents an insurer from canceling a life insurance policy after a 1 or 2 year period

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84

ISO and AAIS

national insurance advisory organization that develops policy forms

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85

declarations

name and age of insured + issued date; 1st part of contract that contains info derived from insurance application; premium amount

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86

definitions

lists key terms + phrases to minimize ambiguity

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87

named insured

includes any others who are included for coverage even if not named specifically

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88

insuring agreement

states what insurer promises + under which conditions

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89

named perils coverage policy

covers ONLY what is specifically stated in the policy

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90

all risk coverage policy

covers any risk that is not specifically excluded

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91

conditions

required actions by the insured after a loss

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92

endorsements are for

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93

riders are for

property + liability insurance

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94

life + health insurance

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95

other provisions

additional info

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96

deductible

amount of money subtracted from the value of a loss

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97

high deductible

low premium

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98

large loss principle

main purpose of insurance is to cover large catastrophic losss

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99

property insurance deductibles include

lump sum deductible; percentage deductible; straight or aggregate

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100

lump sum deductible

equal to a specific amount

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