C130 Chapter 7 Essential Skills for the Insurance Broker and Agent

STUDY 7 - Liability Insurance / Page 1

LEGAL LIABILITY    Responsibility under the law, of individuals or corporations, whose wrongful actions or lack of action cause other persons to suffer bodily injury (BI) or property damage (PD) requiring financial compensation.

1. Action > hitting another person with a golf ball.
2. Inaction > failing to clear a sidewalk of snow or ice.
3. Accidents > unexpected or unintended by the client – exploding BBQ injures others.
4. Liability For Others > under control or supervision – contractors / employees / minor children.
5. $ Assets Put at Risk > court costs (litigation, appeals) / awards / interest = Bankruptcy.
6. Risk > possibility third party will hold client responsible whether or not client is legally liable.
7. Covers > $$$ damages - BI/PD proven by third party + defense costs + interest.

THIRD PARTY    Party (claimant-plaintiff) who is not a party to the insurance contract but is blaming the first party to the insurance contract (insured-defendant) for BI/PD suffered.

DAMAGES        Sum of money claimed or awarded as compensation for BI/PD.

1) Compensatory        Third party awarded for BI/PD under Common Law:

    a) Special    Out of Pocket > receipts - lost earnings / medical costs.

    b) General    Harder to Measure > disability / disfigurement / pain and suffering.

    2) Punitive (Exemplary)        a) Punish defendant as deterrent to them and others.
                    b) Excluded > from liability policies / subject to court decision.

Canadian Law
JURISDICTION    Division of power under the Constitution Act:

1. Federal > currency / foreign relations / insurance industry / military / postal service.
2. Provincial > education / insurance industry / property rights / traffic safety acts.
3. Municipal > by-laws – busines / parking / property.

CRIMINAL LAW                    CIVIL LAW
Crime        Act against society prohibited    Civil Action    Dispute between individuals / entities.

by statute – Criminal Code.            as to their rights and responsibilities.

Guilt         Determined by courts.        Fault         Determined by courts - % of liability.
Penalties     Fine / Imprisonment.        Penalties     $$$ compensation for injured party.

COMMON LAW        Originated in England:

1. Development > from common elements identified and applied by the Crown.
2. Case Law        1) General Principles > created through successive judicial decisions.

2) Precedent > decisions made in prior cases guide future decisions.

3) Hierarchy of Precedent > higher court supersedes lower courts.

   

3. Statute Law         1) Legislated > passed by governments in written form.

2) Purposes > cover new areas / consolidate, codify existing practices.

3) Supersedes Case Law > when one conflicts with the other.

4) Acts > Insurance / Occupier’s Liability / Traffic Safety.

CIVIL CODE (QUEBEC)    Originated in France:

1. Development > common elements of Code Napoleon + Civil Code of Lower Canada.
2. Codifies > numbered sections (1457) combine case / civil / statute laws.
3. Application > interpret specific or general principles of justice to resolve disputes.

THE COURT SYSTEM    Ranked in order of superiority:
    Federal        1) Supreme > final authority – must consent to hear appeals.
            2) Appeals > same as provincial courts.
            3) First Recourse > corresponds to provincial Supreme or Appeals Court.

    Provincial    1) Appeals (Supreme – Queen’s Bench) > challenge lower court judgments.
            2) County or District > less complex disputes.
            3) Small Claims > minor disputes less than a specified amount.
Legal Liability

1) Negligence    The duty of care that is owed to others is assessed according to the standards set by society for the conduct of a reasonable person.

    BLYTH v. BIRMINGHAM WATER WORKS (1856 – Common Law)

The omission to do something that a prudent and reasonable person would do, or the doing of something that a prudent and reasonable person would not do.

A reasonable person exercises sound judgment and acts within reason. He or she does nothing a prudent person would not do and does not omit to do anything that a prudent person would do.

    QUEBEC (CCQ)

A person endowed with reason is responsible for acting so as not to cause injury (bodily, material-property, moral) or damage and are otherwise liable to make good any damage caused.

Special Provisions > minors (under age 18) or those with impaired mental capacity.

1. Tort > wrongful act done to another causing injury or damage.
2. Wrongful Act > action / failure to act.
3. Foreseeability > a reasonable person can foresee consequences of their action/inaction.

ABC RULE            In order to prove negligence, the court must be satisfied that:

1. A Duty of Care Existed > keeping a sidewalk clear of snow and ice.
2. The duty was Breached > failing to clear a sidewalk of snow and ice.
3. The Breach Caused Damages > the ice-covered sidewalk caused a slip and fall.

2) Nuisance        Only under Common Law – rarely triggers an insurance claim:

1. Private    Interfering with person’s use / enjoyment of their living area - noise.
2. Public    Interfering with rights or conduct of many people - blocking a road (AG action).

3) Breach of Contract    One of the parties fails to fulfill their obligations under the contract:   

1. Liability Insurance > limited application in respect to contracts.
2. Common > occupiers of premises (tenants) / products.
3. Review Documents > agreements – lease / sales / suppliers.

Liability Exposures

1. Broker > helps client identify / assess exposures – what client does / makes / owns / says.
2. Use Standard Forms > application / checklist / survey.

DUTIES AND RESPONSIBILITIES

1. Persons Entering Property    Reasonable care exercised in keeping premises safe:

1. Quebec (CCQ) > accountability for damage caused by things – buildings.
2. Common Law > based on what caused damage / why person is on the premises.

i) Trespasser         - enters > without right or permission of occupier.

            - duty > least - but still must treat humanely (no traps).

            - precedent > Venoit v. Kerr-Addison Mines Ltd. (1975).

ii) Licensee         - enters > with consent of occupier.

            - duty > greater - protect from known traps or dangers.

iii) Invitee         - enters > for matters of mutual $$$ / material interest.

            - invitation > express - booking / implied - hours posted.

            - duty > greatest – reasonable care from hazards known.

3. Occupier’s Liability Act         Provincial statute establishes elements:

i) Visitor to Premises > duty of reasonable care to ensure their safety.

ii) Responsibility > occupier / tenant v. owner.

iii) Exception > owner agrees to maintain / tenant advises of deficiency.

4. Children     i) incapable of understanding consequences, even if trespassing.

ii) duty > highest – keep premises safe and free of danger.

iii) attractive nuisance (allurement) > natural draw – building / water.

CHILDREN AND PARENTS

1. Children        a) Responsible > for own actions unless incapable of understanding.

b) Standard of Care > same age and development – ignore warnings.

c) Common Law > move to increased parental responsibility.

d) Parents > liable unless reasonable supervision / discourage actions.

2. Parents        a) Not Responsible > unless child:

i) acting on parent’s express instructions or under authority.

ii) employed by parent and acting within scope of employment.

iii) dangerous thing (vehicle) or animal escapes child’s control.

b) Quebec (CCQ) > prove - properly supervised / raised / educated.

OWNERSHIP OF ANIMALS    Owner responsible for actions / control / supervision:

1. Pets > dogs most common cause of BI/PD suffered by third parties on premises.
2. Aggressive > greater duty of care as owner knows animal more likely to attack.
3. Dangerous Animals > certain breeds may be ID under statute – pit bulls.
4. Guard Dogs > dangerous to anyone entering premises, including thieves.
5. Provincial Statute > owner may be responsible even if unaware of animal’s traits.
6. Issues > who was in control (insured, other party) / animal provoked to attack.

OWNERSHIP OF DANGEROUS THINGS    Owner has fewer defenses to negligence:

1. Duty > keep thing from escaping / guard others from harm if in contact with.
2. Rylands v. Fletcher (1868) > property owner liable for damage caused by water escape.
3. Attractive Nuisance > municipal by-laws to restrict access – fence / locked gate.

HOST LIQUOR LIABILITY        Social hosts can be held liable for actions of intoxicated guest:

1. Duty > keep guest from harming – themselves / other guests / third parties (motorists).
2. Negligence > failure to prevent dangerous actions, simply warning is not enough.
3. Quebec (CCQ) > plaintiff proves defendant failure to fulfill duty caused damages.

ACTIONS OF EMPLOYEES    Employers can be held responsible and liable for actions:

1. Quebec (CCQ) > principals (employers) unless they can exonerate themselves.
2. Common Law > status of employee determines extent of employer’s liability.
3. Independent Contractor > employer not responsible unless – control / direct / supervise.
4. Principal > contractor liability insurance = confirm cover + additional named insured.
5. Supervised Employee > greater supervision = greater responsibility – nanny.

LIBEL AND SLANDER    Client may make remarks that defame a third party’s good name:
    LIBEL        Defamation or injury of a person’s reputation by a published writing.

SLANDER    Verbal defamation or injury of a person’s reputation.

1. Liability > based on – extent of distribution / degree of truth in remarks.
2. Common Exclusion > added forms may be required to cover client’s exposure.

INSURANCE FOR EXPOSURES       

1. Identify > application / checklist / client profile / survey.
2. Notify U/W > unusual exposures – home business / pool / trampoline / watercraft.
3. Outside Scope > quote coverage for added exposure – umbrella.
4. Avoid Recommending Limit > examples / options / client decides / document decision.