Legal Concepts of Legal Concepts of Liability InsuranceLiability Insurance

Professional Insurance Agents Professional Insurance Agents Association of VA/DCAssociation of VA/DC

Course ObjectivesCourse Objectives

Four Types of ExposuresFour Types of Exposures Test for negligenceTest for negligence Defense and conditions for Defense and conditions for

negligencenegligence Duty to DefendDuty to Defend Claims SettlementClaims Settlement Payments by policy limit structurePayments by policy limit structure

Liability InsuranceLiability Insurance

Insurance for money the policyholder Insurance for money the policyholder is legally obligated to pay because of is legally obligated to pay because of bodily injury or property damage bodily injury or property damage caused to another person and caused to another person and covered in the policy. covered in the policy.

Liability DefinedLiability Defined

Legal responsibility for damages Legal responsibility for damages caused by your actions or activities.caused by your actions or activities.

Types of LiabilityTypes of Liability

1.1. Strict LiabilityStrict Liability

2.2. Absolute LiabilityAbsolute Liability

3.3. Vicarious LiabilityVicarious Liability

4.4. NegligenceNegligence

Strict LiabilityStrict Liability

A legal doctrine that makes some A legal doctrine that makes some persons responsible for damages persons responsible for damages their actions or products cause, their actions or products cause, regardless of any “fault” on their regardless of any “fault” on their part.part.

Product LiabilityProduct Liability Privity of ContractPrivity of Contract

Absolute LiabilityAbsolute Liability

Liability for an injury whether or not Liability for an injury whether or not there is fault or negligence.there is fault or negligence.

Similar to Strict LiabilitySimilar to Strict Liability

Application of Absolute LiabilityApplication of Absolute Liability FirearmsFirearms FireworksFireworks AnimalsAnimals

Vicarious LiabilityVicarious Liability

Liability imposed upon a person because Liability imposed upon a person because of the act or omission of another.of the act or omission of another. Respondeat SuperiorRespondeat Superior

Also called Contingent LiabilityAlso called Contingent Liability

TypesTypes General Contractor/Sub ContractorGeneral Contractor/Sub Contractor Parent/ChildParent/Child Employer/EmployeeEmployer/Employee

NegligenceNegligence

Failure to exercise the degree of care Failure to exercise the degree of care an ordinary, prudent person would an ordinary, prudent person would use to protect others from use to protect others from unreasonable risk of harm or injury.unreasonable risk of harm or injury.

Negligence per seNegligence per se

Insurance Response to LiabilityInsurance Response to Liability

Legal Liability – liability to which a Legal Liability – liability to which a defendant in a civil action is defendant in a civil action is exposed.exposed.

Sources of LiabilitySources of Liability TortTort Statute or RegulationStatute or Regulation ContractualContractual

Res Ipsa LoquitorRes Ipsa Loquitor

““The facts speak for themselves.”The facts speak for themselves.”

Rule of evidence under which an Rule of evidence under which an individual is deemed, under specific individual is deemed, under specific circumstances, to be negligent by circumstances, to be negligent by the mere occurrence of an accident.the mere occurrence of an accident.

Negligence TestsNegligence Tests

Reasonable Man Test / Prudent Reasonable Man Test / Prudent Person ConceptPerson Concept

Reasonable Woman TestReasonable Woman Test

Elements of NegligenceElements of Negligence

1.1. Legal Duty or Standard of CareLegal Duty or Standard of Care

2.2. Breach of DutyBreach of Duty

3.3. Proximate CauseProximate Cause

4.4. Actual Loss or DamageActual Loss or Damage

Defending Negligence ClaimsDefending Negligence Claims

1.1. Assumption of RiskAssumption of Risk

2.2. Contributory NegligenceContributory Negligence

3.3. Comparative NegligenceComparative Negligence

4.4. Acts of GodActs of God

5.5. Intervening CauseIntervening Cause

6.6. Statute of LimitationsStatute of Limitations

Assumption of RiskAssumption of Risk

The legal principal that a person who The legal principal that a person who knows and deliberately exposes knows and deliberately exposes herself to a danger assumes herself to a danger assumes responsibility for the risk, rather than responsibility for the risk, rather than the person who actually created the the person who actually created the danger. danger.

Assumption of Risk is often referred Assumption of Risk is often referred to as Voluntary Assumption of Risk.to as Voluntary Assumption of Risk.

Contributory NegligenceContributory Negligence

In the law of negligence, a failure by the In the law of negligence, a failure by the plaintiff to exercise reasonable care plaintiff to exercise reasonable care which, in part at least, is the cause of an which, in part at least, is the cause of an injury.injury.

Contributory negligence defeats a Contributory negligence defeats a plaintiff’s cause of auction for negligence plaintiff’s cause of auction for negligence in states that have not adopted the in states that have not adopted the doctrine of comparative negligence.doctrine of comparative negligence.

Comparative NegligenceComparative Negligence

The doctrine adopted by most states that The doctrine adopted by most states that requires a comparison of the negligence of requires a comparison of the negligence of the defendant with the negligence of the the defendant with the negligence of the plaintiff; the greater the negligence of the plaintiff; the greater the negligence of the defendant, the lesser the level of care defendant, the lesser the level of care required of the plaintiff to permit her to required of the plaintiff to permit her to recover. recover.

Plaintiff’s negligence does not defeat her Plaintiff’s negligence does not defeat her cause of action, but it does reduce the cause of action, but it does reduce the damages she is entitled to recover.damages she is entitled to recover.

Act of GodAct of God

An unusual, extraordinary, and An unusual, extraordinary, and unexpected act caused solely by the unexpected act caused solely by the forces of nature.forces of nature.

Examples include: a storm; a bolt of Examples include: a storm; a bolt of lightning; flood, earthquake, hurricane.lightning; flood, earthquake, hurricane.

A person cannot be held liable for an Act A person cannot be held liable for an Act of God.of God.

Intervening CauseIntervening Cause

A cause that intrudes between the A cause that intrudes between the negligence of the defendant and the negligence of the defendant and the injury suffered by the plaintiff, injury suffered by the plaintiff, breaking the connection between the breaking the connection between the original wrongful act or omission and original wrongful act or omission and the injury, and itself becoming the the injury, and itself becoming the proximate cause of the injury.proximate cause of the injury.

Statute of LimitationsStatute of Limitations

Federal and State statutes prescribing Federal and State statutes prescribing the maximum period of time during the maximum period of time during which various types of civil actions which various types of civil actions can be brought after the occurrence can be brought after the occurrence of the injury of the offense.of the injury of the offense.

Duty to DefendDuty to Defend

A legal obligation imposed by contract A legal obligation imposed by contract (insurance policy.)(insurance policy.)

However, this duty ends when the However, this duty ends when the insurance company has used up the insurance company has used up the applicable limits of insurance in the applicable limits of insurance in the payment of settlements or payment of settlements or judgments.judgments.

Understanding DamagesUnderstanding Damages

Three types of damages can be Three types of damages can be awarded to a plaintiff:awarded to a plaintiff:

Compensatory DamagesCompensatory Damages Special DamagesSpecial Damages

General DamagesGeneral Damages Punitive DamagePunitive Damage

Compensatory DamagesCompensatory Damages

Damages recoverable in a lawsuit for Damages recoverable in a lawsuit for loss or injury suffered by the plaintiff loss or injury suffered by the plaintiff as a result of the defendant’s as a result of the defendant’s conduct.conduct.

Also called “Actual Damages”Also called “Actual Damages”

Special Damages may be added and Special Damages may be added and arise from the particular or special arise from the particular or special circumstances of the case.circumstances of the case.

General DamagesGeneral Damages

Reimbursement for damages that do Reimbursement for damages that do not readily lend themselves to not readily lend themselves to quantitative measurement. quantitative measurement. Commonly known as “pain and Commonly known as “pain and suffering.”suffering.”

Damages that are the natural and Damages that are the natural and probable result of the wrongful acts probable result of the wrongful acts complained ofcomplained of

Punitive DamagesPunitive Damages

Damages that are awarded over and Damages that are awarded over and above compensatory damages above compensatory damages (actual damages) because of the (actual damages) because of the wanton, reckless, or malicious nature wanton, reckless, or malicious nature of the wrong done by the defendant.of the wrong done by the defendant.

Massachusetts & Nebraska do not Massachusetts & Nebraska do not allow punitive damage awards.allow punitive damage awards.

VA Statute VA Statute §38.2-227§38.2-227

Payment of DamagesPayment of Damages

Policy limit dictates maximum amount Policy limit dictates maximum amount to be paid.to be paid.

Per Occurrence Or Per Person – Per Occurrence Or Per Person – maximum paid based on the incidentmaximum paid based on the incident

Aggregate – maximum paid during Aggregate – maximum paid during policy term regardless of number of policy term regardless of number of losses.losses.

Policy Limit StructurePolicy Limit Structure

Will either be Split Limit or a Combined Will either be Split Limit or a Combined Single Limit.Single Limit.

Split LimitsSplit Limits

Policy Limits Policy Limits Available:Available:

$25,000 – BI per $25,000 – BI per personperson

$50,000 – BI Accident$50,000 – BI Accident

$20,000 – PD $20,000 – PD AccidentAccident

Claim for Damages:Claim for Damages:

# 1 - $20,000 # 1 - $20,000 medicalmedical

#2 - $35,000 medical#2 - $35,000 medical

$27,000 Prop $27,000 Prop DamageDamage

Combined Single LimitCombined Single Limit

Policy Limits Policy Limits Available:Available:

$100,000 Per $100,000 Per OccurrenceOccurrence

$100,000 Aggregate$100,000 Aggregate

Claim for Damages:Claim for Damages:

# 1 - $20,000 # 1 - $20,000 medicalmedical

#2 - $35,000 medical#2 - $35,000 medical

$27,000 Prop $27,000 Prop DamageDamage

Questions???Questions???

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