Chapter 6 : Introduction To Liability Insurance

1. Failure to use the care that is required to protect others from the unreasonable chance of harm is called what?

Proximate cause

Negligence

A criminal act

An intervening cause

B is correct. Negligence is the lack of reasonable care that is required to protect others from the unreasonable chance of harm.

Explanation

B is correct. Negligence is the lack of reasonable care that is required to protect others from the unreasonable chance of harm.

2. Liability that an insured incurs because of the actions of others, such as employees, is called what?

Vicarious liability

Absolute liability

Breach liability

Proximate liability

A is correct. Vicarious liability is liability that a person or business incurs because of the actions of others, such as family members or employees.

Explanation

A is correct. Vicarious liability is liability that a person or business incurs because of the actions of others, such as family members or employees.

3. Liability that is imposed as a matter of law without regard to negligence is called what?

Vicarious liability

Absolute liability

Breach liability

Proximate liability

B is correct. Absolute liability is imposed by law on those participating in certain activities that are considered to be especially hazardous. Individuals involved in such operations can be held liable for the damages of another even though the individual was not negligent.

Explanation

B is correct. Absolute liability is imposed by law on those participating in certain activities that are considered to be especially hazardous. Individuals involved in such operations can be held liable for the damages of another even though the individual was not negligent.

4. Theresa, a spectator at a baseball game, is injured when an errant ball hits her in the head. She sues the stadium owners for negligence. Which one of the following defenses against negligence would the owners probably use?

Assumption of risk

Comparative negligence

Contributory negligence

Statute of limitations

A is correct. Assumption of risk applies when a person knowingly exposes himself or herself to danger or injury. When a person assumes this risk, he or she might be prevented from recovering from a negligent party. This doctrine is frequently associated with injuries incurred by spectators at sporting events.

Explanation

A is correct. Assumption of risk applies when a person knowingly exposes himself or herself to danger or injury. When a person assumes this risk, he or she might be prevented from recovering from a negligent party. This doctrine is frequently associated with injuries incurred by spectators at sporting events.

5. As a result of a successful lawsuit, Agnes receives $10,000 to cover her specific losses, an additional $40,000 for pain and suffering, and because the defendant was considered to have acted with willful disregard for others' safety, Agnes was awarded an additional $75,000. This additional $75,000 award can best be described as what type of damages?

General damages

Compensatory damages

Liability damages

Punitive damages

D is correct. All of the described damages are for liability. General damages are a type of compensatory damages in which the injured party is compensated for his or her loss. Punitive damages are awarded over and above compensatory damages as a way of punishing the wrongdoer.

Explanation

D is correct. All of the described damages are for liability. General damages are a type of compensatory damages in which the injured party is compensated for his or her loss. Punitive damages are awarded over and above compensatory damages as a way of punishing the wrongdoer.

6. An action that, in a natural and continuous sequence, produces a loss is the

Hazard.

Proximate cause.

Appraisal point.

Exposure.

B is correct. Proximate cause is one of the elements required to establish a charge of negligence. It is an action that, in a natural and continuous sequence, produces a loss.

Explanation

B is correct. Proximate cause is one of the elements required to establish a charge of negligence. It is an action that, in a natural and continuous sequence, produces a loss.

7. George accidentally hits Elaine's car with his car. The accident causes $3,000 of damage to Elaine's car, plus Elaine is injured and her medical bills come to $1,000. George's car also sustains $500 damage in the accident, but George isn't hurt. What will George's auto liability coverage pay for?

The damage to Elaine's car only

The damage to Elaine's car and Elaine's medical bills only

The damage to George's and Elaine's cars only

The damage to George's and Elaine's cars, and Elaine's medical bills

B is correct. Liability coverage does not pay for property or bodily injury to an insuredone's own property and medical insurance is needed for that.

Explanation

B is correct. Liability coverage does not pay for property or bodily injury to an insuredone's own property and medical insurance is needed for that.

8. All of the following must be present to establish negligence except which one?

Proximate cause

Legal duty owed and breach of duty

Damages

Willful action

D is correct. Negligence is the lack of reasonable care that is required to protect others from the unreasonable chance of harm. The factors used to establish negligence are legal duty owed, breach of legal duty owed, proximate cause, and damages.

Explanation

D is correct. Negligence is the lack of reasonable care that is required to protect others from the unreasonable chance of harm. The factors used to establish negligence are legal duty owed, breach of legal duty owed, proximate cause, and damages.

9. Lee sues Pat for injuries sustained in an auto accident. During the trial, it is determined that Lee's negligence contributed to the loss. Under comparative negligence laws, what can Lee recover?

Lee cannot recover any damages from Pat.

Lee's damages will be reduced to the extent of her own liability for the loss.

Lee can recover the full amount of the loss from Pat.

Lee might only recover 50% of the damages she claims regardless of her degree of negligence.

B is correct. Under a comparative negligence law, a finding of liability can be made even when both parties have contributed to the loss, with an award based on the extent of each party's negligence.

Explanation

B is correct. Under a comparative negligence law, a finding of liability can be made even when both parties have contributed to the loss, with an award based on the extent of each party's negligence.