27-1

Criminal and Tortious Behavior

1. Two classes of wrong: public and private (crimes and torts).

2. Crimes are punishable by fine, imprisonment or execution.

3. Tortfeasors may be liable in civil actions.

4. Torts may be intentional or unintentional.

5. Liability insurance is concerned primarily with unintentional torts.

27-2

Liability May be Imposed When

1. There was negligence.

2. There was actual damage or loss.

3. The negligence was the proximate cause of the damage.

27-3

There Must be Negligence

1. Basic concept of law holds that unless a person is at fault, he or she is not liable.

2. Negligence is the failure of a person to exercise the proper degree of care required by the circumstances.

27-4

Who May be Held Liable?

1. Persons capable of prudent acts

• infants excepted

• mental incompetents

2. Other excepted classes (or formerly excepted)

• government bodies (sovereign immunity)

• charitable institutions

27-5

What Constitutes Negligence

1. Failure to behave in the same manner as would a reasonable and prudent individual.

2. Obligation to act or not act, and failure in that obligation.

3. Normally, the burden of proof of negligence is on the injured party.

4. Certain doctrines impose liability by statute or shift the burden of proof.

27-6

Tort Doctrines

1. Negligence per se

2. Absolute liability

3. Res ipsa loquitur

27-7

There Must be Actual Damage or Loss

1. Mere carelessness or negligence is not sufficient cause for legal liability.

2. The person seeking recovery must have suffered actual injury or damage.

3. Tort may result in two forms of injury to another:

• bodily injury

• property damage

27-8

Classes of Damages

1. Special damages: out of pocket and measurable loss.

2. General damages: intangible; pain and suffering, etc.

3. Punitive damages: intended to punish tortfeasor.

27-9

Collateral Source Rule

1. Holds that negligent party should not benefit from the existence of other sources of recovery available to the injured party.

2. Damages payable by a tortfeasor are not reduced by payments made to the injured party under life or health insurance contracts.

27-10

Negligence Must Be Proximate Cause of Damage

There must have been an unbroken chain of events beginning with the negligence and leading to the injury or damage.

• intervening cause

• superseding cause

27-11

Vicarious Liability

1. Respondeat Superior

2. Parental responsibility for acts of children

3. Joint-and-several liability

27-12

Joint-and-Several Liability

1. Liability is joint-and-several when plaintiff obtains a judgment that may be enforced against multiple tortfeasors collectively or individually.

2. Permits plaintiff to recover the entire amount of a judgment from any tortfeasor who is able to pay, regardless of the degree of that party’s negligence.

3. A number of states passed laws in 1986 and 1987 to abolish or modify joint-and-several liability.

27-13

Obligations of Property Owners to Others

1. Trespasser avoid intentional injury

2. Licensee warn of any dangers

3. Invitees make the premises safe

4. Children attractive nuisance doctrine

27-14

Defenses to Negligence

1. Assumption of risk

2. Negligence on the part of the injured party

• contributory negligence

• comparative negligence

• last clear chance

3. Survival of tort actions

4. Legal liability and bankruptcy

27-15

Comparative Negligence

CommonPercent Law Wisc. Miss.

Party At Fault Loss Recovery Rule Rule

Brown 40% $10,000 0 $6,000 $6,000

White 60% $10,000 0 0 $4,000

27-16

Possible Changes in the Tort System

1. Alternative dispute resolution mechanisms (binding arbitration for small claims).

2. Elimination of joint-and-several liability.3. A sliding fee schedule for plaintiff’s attorneys.4. “Caps” on noneconomic damages.5. Elimination of collateral source rule.6. Structured settlements to replace lump sum

awards.7. Elimination of punitive damages or make punitive

damages payable to the state.

27-17

Liability Insurance in General

1. Undertakes to pay the obligation imposed on a negligent insured.

2. Called “third party” coverage since it compensates someone who is not a party to the contract.

3. In addition to promise to pay, usually agrees to defend insured.

27-18

Types of Liability Insurance

1. Automobile liability insurance

2. Employers liability and workers compensation

3. General liability

27-19

Comprehensive Personal Liability Coverage

1. May be purchased separately, or as Section II of the homeowners policy.

2. Covers the non-business, non-auto liability exposure of the individual or family.

27-20

Homeowners Section II Coverages

1. Coverage E Personal Liability

2. Coverage F Medical Payments to Others

3. Additional Coverage

27-21

Liability Insuring Agreement

If a claim is made or a suit is brought against any insured for damages because of bodily injury or property damage to which this coverage applies, we will:

a. Pay up to our limit of liability for the damages for which the insured is legally liable; and

b. Provide a defense at our expense by counsel of our choice.

27-22

Liability Insuring Agreement

We may make any investigation and settle any claim or suit that we decide is appropriate.

Our obligation to defend any claim or suit ends when the amount we pay for damages resulting from the occurrence equals our limit of liability.

27-23

Section II - Persons Insured

1. Named insured

2. Relatives residing in the same household

3. Any other person under 21 in care of insured

4. Persons having custody of covered animals or watercraft

5. Employees or anyone with permission while operating a covered vehicle

27-24

Liability Exclusions

1.a. Intentional injury

1.b. Business and professional activities engaged in by insured

1.c. Rental of property

1.d. Professional liability

1.e. Uninsured premises

27-25

Liability Exclusions

1.f. Motor vehicles

• designed for travel on public roads

• owned recreational motor vehicles off premises

• exception for golf carts, and vehicles not subject to registration used to service premises or to assist the handicapped

27-26

Liability Exclusions

1.h. Aircraft completely excluded

1.i. War

1.j. Communicable disease

1.k. Sexual molestation or abuse

1.l. Controlled substance

27-27

Homeowners Medical Payments

Agrees to pay all reasonable medical expenses incurred or medically ascertained within 3 years from date of accident to persons (other than the insured and family members) injured:

a. while on premises with permission of any insured

27-28

Homeowners Medical Payments Exclusions

1. Intentional injuries, business pursuits, uninsured premises, motor vehicles, recreational motor vehicles, boats, nuclear

2. Injury to residence employee off premises while not working

3. If expenses are payable under workers compensation

4 Persons residing on the premises

27-29

Section II Conditions

1. Limit of Liability

2. Severability of Insurance

3. Duties After Loss

4. Duties of Insured Persons - Medical Payments

5. Payment of Claims - Medical Payments

6. Suits Against Us

7. Bankruptcy of Insured

8. Other Insurance - Coverage E

27-30

Professional Liability Insurance

Insurance for liability arising out of failure to use due care and the degree of skill expected of a person in a particular profession.

1. Malpractice insurance, where there is an exposure of bodily injury

2. Errors and Omissions, where the risk involves property damage (including intangible property)

27-31

Professional Liability Insurance

1. Generally written on a claims-made basis.

2. Under older policies, insurer was required to obtain insured’s consent for settlement.

3. Most newer policies have deleted the requirement that the insurer obtain consent of the insured before making an out-of-court settlement.

27-32

Umbrella Liability Policy

1. Requires a substantial program of underlying coverage.

2. Provides excess protection for losses covered by underlying.

3. In those areas where umbrella is broader than primary insurance, coverage applies subject to a deductible.

27-33

Personal Auto Policy Homeowners

$250 $250 $250

Personal Umbrella

$100K

$300K

$50K

$300K

$1.3 million

$1 million