RMI 200 Chapters 19-23

Question Answer
tort is a legal wrong for which the court allows a remedy in the form of money damages
plaintiff or claimant the person who is injured
tortfeasor or defendant sues for damages
Torts fall into 3 categories intentional, strict liability, negligence
Intentional Act or omission that results in harm or injury to another, assault, battery, fraud, slander
Strict liability liability imposed regardless of negligence or fault since harm is so great, blasting, work injury
negligence is the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm
What is the standard of care ? depending on age, knowledge, seriousness of harm, court interpretations
What are the four critical elements of Negligence? legal duty to use reasonable care, failure to perform that duty, damage or injury, proximate cause
Compensatory damages compensate the victim for losses actually incured
Special damages provide compensation for damages that can be determined and documented
general damages provide compensation for damages that cannot be specifically measured
Punitive damages are designed to punish people and organizations so that others are deterred from committing the same wrongful act
Contributory negligence law the injured person cannot collect damages if his or her care falls below the standard of care required for his or her protection
Strict application of common law the injured cannot collect damages if his or her conduct contributed in any way to the injury
Comparative negligence law the financial burden of the injury is shared by both parties according to their respective degrees of fault
pure rule you can collect damages even if you are negligent, but your reward is reduced in proportion to your fault (13 states)
50 percent rule you cannot recover if you are 50 percent or more at fault, if LT 50 % then proportionate (12 states)
51 percent rule you cannot recover if you are 51% or more at fault, if LT 51% then proportionate (21 states)
last clear chance rule states that a plaintiff who is endangered by his or her own negligence can still recover damages from the defendant if the defendant has a last clear chance to avoid the accident but fails to do so
Family purpose doctrine the family member that owns an auto can be held liable for the negligent acts committed by other immediate family members
Joint business venture negligently injuring a customer of this can have all partners liable for the injury
Dram shop law a business that sells liquor can be held liable for damages that may result from the sale of liquor
Res ipsa loquitur "the thing speaks for itself" the very fact that the injury or damage occurs establishes a presumption of negligence on the part of the defendant- it is up to the defendant to refute the presumption of negligence
Three requirements must be met for res ipsa loquitur to apply: 1) the event is one that normally does not occur in the absence of negligence 2) the defendant has exclusive control over the instrumentality causing the accident 3) the injured party has not contributed to the accident in any way
reforming the tort liability system: capping noneconomic damages, such as pain and suffering; reinstating the state-of-the-art defense for product liability cases wherein if the product conformed to prevailing technology it would not be considered defective
reforming the tort liability system continued: restricting punitive damages awards- which are getting out of control; modifying the collateral source rule
collateral source rule defendants cannot introduce evidence about the plaintiff (injured party) receiving compensation from other sources
Joint and liability rule several parties may be responsible for the injury to plaintiff but a defendant who is only slightly responsible may be required to pay the full amount of damages
alternative dispute resolution a technique for resolving a legal dispute using arbitration or mediation- cheaper and eliminates juries and problematic data conslusions
Autos covered by the policy include: any auto shown in the declarations, a newly acquired auto- generally require notification-varies by coverage and whether it is a replacement or new vehicle, a trailer owned by the named insured, a temporary substitute vehicle
temporary substitute vehicle which is a non- owned auto or trailer used temporarily because of mechanical breakdown, repair, servicing, loss, or destruction of a covered vehicle
What is the most important part of the PAP (personal auto policy) ? liability coverage, Part A
Part A it protects a covered person against a suit or claim arising out of the ownership or operation of a covered vehicle, the insurer agrees to pay and damages for the BI or PD for which the insured becomes legally liable to pay
Split limits what the coverage is usually written in, where the amounts of insurance for bodily injury liability and property damage liability are stated separately
250/500/100 250,000 for each persons bodily injury, 500,000 for total bodily injury, 100,000 for property damage
single limit which applies to the TOTAL accident for both BI and PD
single limit of 500,000 would apply to the total BI and PD and is the maximum paid for all injured parties
duty to defend the insurer also agrees to provide a defense and pay all legal defense costs for claims covered by the policy- in addition to limit
When does the insurer's duty to defend end? when the limit is exhausted- but the insurer cannot simply tender its limits- no duty to defend if the claim is not covered (intentional acts)
Liability coverage applies to: 1) the named insured and any resident family member, 2) any person using the named insured's covered auto w/ permission, 3) any person or organization legally responsible for any insured's use of a covered auto on behalf of that person or organization
liability coverage applies to contd: 4) any person or organization legally responsible for the named insured's or family members' use of any auto or trailer
What happens if the accident occurs in another state? the financial responsibility law in that state has higher liability limits than shown in the declarations, the PAP automatically provides the higher limits
If more than one liability policy covers a loss: for owned vehicle, the insurer pays its pro rata share (based on limits) of the loss, for a non-owned vehicle- the insurance coverage is excess over any other insurance
Exclusions to Part A liability coverage: intentional injury or damage, vehicles used without permission, racing vehicles, nuclear energy
Part B: medical payments coverage (usually 1k-10k) covers all reasonable medical and funeral expenses incurred by an insured in an accident, coverage is not based on fault
Part C: Uninsured motorists coverage, coverage applies to: the named insured and family members, another person while occupying a covered auto, any person legally entitled to recover damages
What is an uninsured vehicle? has no applicable BI insurance, has limits below the financial responsibility laws, a hit and run vehicle, the responsible driver has a policy but their insurer denies coverage or is insolvent
The insurer agrees to pay what the insured is legally entitled to be compensated for but: 1) the coverage applies only if the insured motorist is legally liable, 2) the max limit is as shown in the Dec Page, 3) no coverage if there is other other coverage, 4) the claim is subject to arbitration if there is a dispute over amounts liabiltiy
Underinsured motorists coverage: can be added to the PAP to provide more complete protection when a negligent driver does not carry enough insurance
Part D: coverage for damage to your auto the insurer agrees to pay for any direct and accidental loss to a covered auto or any nonowned auto- this is collision and comprehensive
collision defined as the upset of your covered auto or non owned auto or its impact with another vehicle or object, paid regardless of fault
Examples for Part D: you lose control of your car on an icy road and overturn, you take your eyes off the road and hit a tree, you find your car was hit by an unknown vehicle
other-than-collision (comprehensive) loss malicious mischief or vandalism, theft, glass breakgage
Part E: duties after an accident or loss call ambulance, do not admit fault, share info w/ operator, get their information, make sure you are prepared to use insurance
After an accident, the insured is required to perform certain duties: promptly notify the insurance company or agent, cooperate with the insurer in the investigation, send the insurer copies of any legal notices received in connection with an accident, take a physical exam, if required
Part F: general provisions: all states restrict the insurer's right to cancel or non-renew coverage
Cancellation provision: the named insured can cancel at any time by returning the policy to the insurer or providing written notice, if a policy has been in force for less than 60 days the insurer can cancel w/ notification
cancellation provision continued: if a policy has been in force for more than 60 days, the insurer can cancel only if: the premium has not been paid, the driver's license of any insured has been suspended, or the policy has obtained through material misrepresentation
financial responsibility law requires motorists to furnish proof of financial responsibility up to certain minimum dollar limits- after the first accident or conviction
Evidence of financial responsibility can be provided in several ways: 1)producing evidence of an auto liability insurance policy with at least certain minimum limits, 2) posting a bond, 3) depositing the amount required by law, 3) showing that the person is a qualified self-insurer
What do financial responsibility laws provide? limited protection against irresponsible mororists
what is the limited protection against irresponsible motorists? since evidence must be provided after the accident there is not guarantee that all victims will be paid, if can't produce evidence- license can be suspended, state laws require only a minimum liability limits, which are relatively low- around 25/50/15
What is Pennsylvania's limited protection? 15/30/5
No-fault auto insurance is where after an auto accident involving bodily injury, each party collects from his or her own insurer regardless of fault, about half of the states have some type of no-fault law in effect
pure no-fault plan accident victims cannot sue at all, regardless of the amount of the claim, NO states have pure no-fault plans
modified no-fault plan victims have limited right to sue
in some states, an injured driver may sue if the bodily injury claim…. exceeds a certain monetary threshold-maybe $5,000
verbal threshold if the injury involves death, dismemberment, disfigurement, or permanent loss of a bodily member or function
add-on plan pays benefits to an accident victim without regard to fault, and the injured person has the right to sue the negligent driver who caused the accident
choice no-fault plan motorists can elect to be covered under the state's no-fault law and pay lower premiums, or they can retain the right to sue under the tort liability system and pay higher premiums (PA, NJ, KY)
full tort option you retain the right to sue for pain and suffering- your premium is higher
limited tort option your ability to sue for pain and suffering is limited to only "serious injuries" your premium is lower
Where can high risk drivers, who have difficulty obtaining auto insurance in the voluntary market go to obtain insurance? shared (residual) market
Shared (residual) markets include: automobile insurance plans, joint underwriting associations, reinsurance facility, Maryland Automobile Insurance Fund, Specialty Insurers
Auto insurance plan (assigned risk plan) makes auto insurance available to motorists who are unable to obtain insurance in the voluntary market, premiums could be 2 or 3 times the normal price
joint underwriting association (JUA) which auto insurers in the state participate in providing coverage to high-risk drivers through a common pool
reinsurance facility (or pool) for placing high-risk drivers, insurers must accept all drivers, can place high risk drivers in the reinsurance pool, underwriting losses of the reinsurance pool are shared by all insurers in the state
Insurers use a variety of factors to establish auto insurance premiums including: age, gender, marital status, territory, use of an auto, driver education, individual driving record, good student discounts, number and types of cars, insurance score
HO-2 (broad form) covers the dwelling, other structures, and personal property on a named perils basis= fire, lightning, windstorm, hail, explosion, riot, civil commotion, theft, falling objects, vandalism, malicious mischief, weight of ice/sleet/snow, volcanic eruption
HO-3 (special form) covers the dwelling and other structures on a risk-of-direct-physical loss basis= all direct physical losses are covered expect those losses specifically excluded, coverage is replacement cost if certain conditions are met
What applies for both HO-2, HO-3, and HO-4? personal property is covered on a named perils basis
HO-4 (contents broad form) designed for renters= includes personal liability insurance, many (say 40%) renters have NO insurance- bad idea- depending on possessions and need for liability insurance. Cost is maybe $200 per year
HO-5 (comprehensive form) provides open perils coverage ("all-risks coverage") on the dwelling, other structures and personal property. All direct physical losses are covered except those losses specifically excluded. Note: personal property is all risks not just named perils
HO-6 (condo/ unit owners form) covers personal property and certain property on a named perils basis, condo association caries insurance on building and other common property, a minimum of $5,000 of insurance is also provided on the condo unit that covers improvements and additions
HO-8 (modified coverage form) designed for older homes whose replacement cost substantially exceeds its market value. Insurer's don't like it when replacement costs exceeds market value (moral hazard)
HO-8 continued dwelling and other structures are based on the amount required to repair or replace using common construction materials and methods, not as rich as replacement cost coverage, has limited theft coverage
Analysis of the HO-3 Policy, who is considered "insureds" under the policy named insured and spouse, resident relatives, other persons under age 21 under care by named insured, full-time student (under age 24) away from home
Section II (liability) coverage also includes: any person legally responsible for your covered animals or watercraft, with respect to a motor vehicle covered by the policy, persons employed by the named insured
Coverage A covers the dwelling on the residence premises and any structure attached to the dwelling, materials intended for construction are included, the coverage specifically excludes land
Coverage B insures other structures on the residence premises, examples: detached garage, shed, the amount of coverage is 10% of the coverage A amount, structures that are rented out or used for a business are excluded
Coverage C insurers personal property owned or used by an insured, 50% of coverage A, vacation home is limited to 10% of coverage C or $1000, whichever is greater
What can an insured use to insure certain personal property for a specific amount? (coverage C continued) a schedule
Coverage C exclusions motor vehicles, animals, aircraft parts, hover crafts, property of roomers, property in a regularly rented apartment
Coverage D (loss of use) provides protection when the residence premises cannot be used because of covered loss, coverage is 30% of coverage A
Additional living expense (coverage D) is the increase in living expenses actually incurred by the insured to maintain the family's normal standard of living
What does the policy pay for the part of the residence that is rented to others, but is not fit to live in? fair rental value
Excluded losses (coverage A+B) collapse, freezing of HVAC, fences, pavements, patios, dwelling under construction, theft of materials, mold, vandalism (if vacant more than 60 days), others such as rodents, wear and tear, smog, rust
What is personal property (coverage C) insured for? a direct physical loss if it is caused by one of the perils listed in the policy (named perils)
Named perils include… fire, windstorm, hail, explosion, riot, snow, sleet, etc.
The peril mist be the…..of the loss proximate cause
Section 1 exclusions certain water damage losses, flood, sewer backups, underground water, neglect, power failures, faulty design, intentional losses, weather conditions- heavy rain causing landslide, war, nuclear hazard, radiation, reaction, contamination , government action
If the dwelling is insured for less than 80% of the replacement costs, the insured receives the larger of: 1) the actual cash value of that part or the building damaged, or 2) amount of insurance carried/ 80% of replacement cost x loss
personal liability insurance protects the named insured and family members against legal liability arising out of their personal acts
personal liability continued the insurer pays amount for which the insured is found legally liable , up to the policy limits, the insurer also pays defense costs, the coverage is found in Section II of the Homeowners policy and all forms have the same coverage
Coverage E protects the insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured's negligence
occurrence defined as an accident which results in bodily injury or property damage during the policy period
Coverage E continied provides a defense, the insurer provides a legal defense, even if the suit is groundless, insurer cannot tender limits to avoid providing a defense, payments are in addition to policy limits
Examples of Coverage E your dog bites someone, a guest trips on a torn carpet or your broken sidewalk, while burning leaves you set fire to your neighbors house
Coverage F is a mini-accident policy for medial expenses to others and is not based on legal liability
medical payments to others pays the reasonable medical expenses of another person who is accidentally injured while on an insured location, or by the activities of an insured, resident employee, or animal owned by or in the care of an insured-not required to be legally liable
Examples of Coverage F a guest slips and breaks their arm, a neighbor's child falls off your swing, while golfing you insure someone accidentally, your dog bites the mailman
What are the Duties after a loss? written notice of the event must be provided to the insurer, including the time, place, circumstances, and names of any claimants and witnesses. The injured person must provide written proof of claim and authorize the insurer 2 obtain copies of medicalrec
Section II Conditions an insured may not sue the insurer unless the insured has complied w the conditions required in Section II, the insurance is excess over other valid and collectible insurance, with some exceptions
Section II Conditions continued no coverage is provided to an insured who concealed or misrepresented any circumstance or material fact or engaged in fraudulent conduct
inflation-guard endorsement provides for an annual pro-rata increase in the limits of insurance in the Section I coverages
earthquake coverage endorsement covers earthquakes, landslides, volcanic eruption, and earth movement- usually high cost with high deductibles
when a personal property replacement cost loss settlement endorsement is added…. to the policy, claims are paid on the basis of replacement cost with no deduction for depreciation
scheduled personal property endorsement provides additional coverage for nine classes of property (jewelry, coins, fine arts, etc.) and the insurer agrees to pay the stated amount for a scheduled item if a total loss occurs
personal injury endorsement is used to extend liability coverage to legal liability arising out of personal injury, false arrest, slander, libel, malicious prosecution
Major rating and underwriting factors include: type of construction, location of home, fire protection class, construction costs in the area, age of home, type of policy, deductible amount, insurance score
Insurers also use reports… that reveal the prior claim history of a home. (CLUE, A-PLUS) includes data up to 5 years of info on property claims

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