8.1 Negligence, Torts, and Legal Liability

Liability Insurance Is Third-Party Coverage

Liability insurance pays sums the insured becomes legally obligated to pay as damages because of bodily injury (BI) or property damage (PD) suffered by a third party. It is the single largest source of questions in the casualty half of the Property & Casualty exam, so master the foundations below before moving to specific forms.

Trap: Liability is ALWAYS third-party. If a question describes the insurer paying the named insured's own loss, that is property/first-party coverage, not liability.

What Is a Tort?

A tort is a civil wrong (other than a breach of contract) for which the law provides a remedy in the form of money damages. Torts are the legal foundation of nearly all liability claims. There are three categories:

• Intentional torts — deliberate acts (assault, battery, libel, slander, false arrest). Most liability policies EXCLUDE intentional/expected injury, though Personal & Advertising Injury coverage carves back libel and slander.
• Strict (absolute) liability — liability WITHOUT fault, imposed for inherently dangerous activities (blasting, keeping wild animals) and for defective products. The plaintiff need not prove negligence.
• Negligence — unintentional failure to exercise reasonable care. This is the basis of the overwhelming majority of insured claims.

Exam point: Standard liability policies are designed for the NEGLIGENT and strict-liability worlds. Intentional torts are generally excluded because insuring deliberate harm violates public policy.

The Four Elements of Negligence

To recover for negligence, the claimant must prove ALL FOUR elements. Miss one and the claim fails — and the insurer owes nothing.

1. Duty — a legal obligation to exercise the care of a reasonably prudent person.
2. Breach — failure to meet that standard of care.
3. Proximate cause — an unbroken causal chain linking the breach directly to the harm.
4. Damages — actual, measurable injury or loss occurred.

Negligence Per Se and Res Ipsa Loquitur

• Negligence per se — violating a safety statute (e.g., running a red light) establishes breach automatically.
• Res ipsa loquitur ("the thing speaks for itself") — the accident is of a kind that does not normally occur without negligence, shifting the burden to the defendant (e.g., a surgical sponge left inside a patient).

Memory hook: D-B-C-D — Duty, Breach, Causation, Damages. All four, every time.

The Four Elements of Negligence

Liability insurance responds to legal liability, and the dominant theory is negligence. To recover, a claimant must prove all four elements; missing any one defeats the claim:

Categories of Torts

A tort is a civil wrong (other than breach of contract) for which the law provides a remedy. The exam distinguishes three categories: intentional torts (assault, battery, libel, slander, false arrest - often excluded by liability policies), negligence (the unintentional failure to exercise reasonable care - the core of most claims), and absolute/strict liability (liability without fault for ultrahazardous activities, defective products, or, in some jurisdictions, dog bites and the keeping of dangerous animals).

Proximate Cause and Foreseeability

Causation requires both cause in fact (the "but-for" test) and proximate cause (the harm was a reasonably foreseeable result of the breach). An intervening, unforeseeable event can break the chain of proximate cause and relieve the defendant. The exam tests this with fact patterns where an unusual or remote consequence raises the question of whether the original negligent act is still the legal cause.

Standards of Care

The baseline is the reasonable person standard, but it scales: professionals are held to the standard of a reasonable practitioner in their field (the basis for professional liability/E&O); common carriers and those dealing with children owe a heightened duty; and property owners owe duties that historically varied with the visitor's status (invitee, licensee, trespasser). Recognizing which standard applies frames whether a breach occurred.

Joint and Several Liability

When multiple defendants cause a single indivisible injury, joint and several liability can make each defendant responsible for the entire judgment, leaving the paying defendant to seek contribution from the others. Many states have modified this by statute to limit a defendant's exposure to its proportionate share of fault.

The exam tests the difference between joint and several (claimant may collect all from one) and several-only (each pays only its share). Pair this with the collateral source rule, under which payments the claimant receives from independent sources (health insurance) traditionally do not reduce the tortfeasor's liability - another concept that liability underwriters and producers must understand when sizing limits.

Pure vs. Modified Comparative Negligence

States allocate fault under one of three systems, and the exam tests the dollar effect: under pure comparative, a claimant 90% at fault still recovers 10% of damages; under modified comparative (50% or 51% bar), recovery is denied once the claimant's fault reaches the threshold; and under the older contributory rule, any fault by the claimant bars all recovery. Knowing which system a fact pattern applies determines how much a negligent claimant ultimately collects from the liability policy.