8.1 Negligence, Torts, and Legal Liability

Three Sources of Legal Liability

Liability insurance responds when an insured becomes legally obligated to pay damages to a third party. The exam expects you to separate the three roots of that obligation:

• Tort liability — a civil wrong (other than breach of contract) for which the law allows a remedy. Most liability claims are torts.
• Contractual liability — an obligation the insured assumed by agreement (a lease, a hold-harmless clause). The CGL's Coverage A excludes contractual liability except for an insured contract.
• Statutory liability — duties imposed by law, such as a workers compensation statute or a dram shop act.

Liability insurance pays only for legal liability. A moral or ethical obligation, with no legal duty behind it, is not covered.

The Three Categories of Torts

The expected or intended injury exclusion in the ISO CGL (CG 00 01) and Homeowners (HO-3, HO 00 03) removes coverage for harm the insured meant to cause. This is why an intentional punch is excluded but a negligent shove that causes an unexpected fall may be covered.

Negligence: The Four Elements (DBCD)

Nearly every liability claim turns on negligence — the failure to exercise the care a reasonably prudent person would use. The plaintiff must prove all four elements; missing one defeats the claim.

1. Duty — a legal obligation to meet a standard of conduct, arising from a relationship, foreseeability of harm, or a statute.
2. Breach — failing to meet that standard (speeding in a school zone, failing to salt an icy walk).
3. Causation — the breach must be the proximate cause of the harm.
4. Damages — actual, measurable harm. No damages, no claim, even if a duty was breached.

Causation has two parts. Cause in fact uses the but-for test: but for the breach, would the injury have occurred? Legal cause asks whether the harm was a foreseeable result. An unforeseeable superseding event (a tornado throwing a negligently parked car through a window) breaks the chain; a foreseeable intervening event does not.

The Reasonable Person Standard and Special Doctrines

The yardstick for both duty and breach is the objective reasonably prudent person. The standard rises for professionals (held to the standard of a reasonable member of their profession — the basis for malpractice and E&O) and adjusts for children (a reasonable child of similar age — unless engaged in an adult activity such as driving).

Two doctrines shortcut the plaintiff's proof:

• Res ipsa loquitur ("the thing speaks for itself") — negligence is inferred when the event does not normally occur without negligence, the instrumentality was in the defendant's exclusive control, and the plaintiff did not contribute. Classic example: a surgical sponge left in a patient.
• Negligence per se — violating a safety statute (running a red light) is automatic breach.

Trap: Vicarious liability is not a fourth tort category — it is a way liability is imputed to one party for another's negligence, covered in 8.2.

Absolute Liability and the Insured Contract

Absolute (strict) liability attaches without any showing of fault because the activity is so dangerous that the law assigns responsibility regardless of care taken. Tested triggers include ultrahazardous activities (blasting, storing explosives), keeping wild or dangerous animals, and, in many states, product defects. A manufacturer can build a product with reasonable care and still be strictly liable if the product is unreasonably dangerous when used as intended.

Products liability splits into three theories the exam pairs with the right tort: manufacturing defect (the item differs from its design), design defect (the design itself is unsafe), and failure to warn (inadequate instructions or warnings). The first sounds in strict liability; warnings often sound in negligence.

On the contract side, the CGL covers liability the insured assumes only through an insured contract — a defined list that includes leases of premises, easement agreements, and the part of any contract where the insured assumes the tort liability of another to pay damages for bodily injury or property damage. A pure agreement to perform work, with no assumption of another's tort liability, is not an insured contract.

Damages Recoverable in a Tort Claim

Before moving to defenses, fix the vocabulary the policy limits respond to:

• Compensatory damages restore the plaintiff and split into special (economic: medical bills, lost wages, repair cost) and general (non-economic: pain and suffering, loss of consortium).
• Punitive damages punish gross or willful misconduct and are uninsurable in many states as a matter of public policy.
• Nominal damages are a token sum recognizing a technical wrong with little measurable loss.

Exam trap: because the fourth element of negligence is damages, a defendant who breaches a duty but causes no measurable harm has committed no actionable negligence. Liability coverage is loss-driven — it pays sums the insured is legally obligated to pay, not amounts the insured merely feels morally bound to offer.