8.1 Negligence, Torts, and Legal Liability
Key Takeaways
- Liability insurance responds to legal obligations a third party can enforce against the insured; it is not first-party coverage for the insured's own property.
- Negligence requires four elements proven together: duty, breach, proximate cause, and actual damages.
- Torts split into negligence (unintentional), intentional torts, and absolute (strict) liability; standard liability policies cover unintentional acts, not intentional ones.
- Liability can arise by contract, by statute, or by tort, and the Commercial General Liability form keys its coverage to legal liability for damages.
- An applicant who is found 0 percent at fault owes no damages, so there is nothing for the liability policy to indemnify.
What liability insurance actually covers
Liability insurance is third-party coverage. It pays when an insured becomes legally obligated to pay damages to someone else for bodily injury or property damage. It does not pay the insured for damage to the insured's own property; that is first-party property insurance. The exam constantly tests this split.
The Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Form CG 00 01 opens its insuring agreement with the phrase that the insurer pays sums the insured becomes legally obligated to pay as damages. No legal obligation means no coverage, even if the insured feels morally responsible.
Sources of legal liability
Legal liability can attach in three ways, and the exam expects you to name the source from a fact pattern.
| Source | How it arises | Example |
|---|---|---|
| Tort | A civil wrong (not a crime, not a contract breach) causing harm | A customer slips on an unmarked wet floor |
| Contract | An assumed obligation in a written or oral agreement | A tenant agrees in a lease to indemnify the landlord |
| Statute | A duty imposed by law | Workers compensation statutes impose employer liability without fault |
Most CGL claims sound in tort. Contractual liability is handled by the insured-contract provisions; statutory liability often falls outside the CGL and into workers compensation or auto financial-responsibility law.
The three categories of tort
- Negligence — an unintentional failure to exercise reasonable care. This is the heart of liability insurance.
- Intentional torts — assault, battery, libel, slander, false arrest. Standard policies exclude expected or intended injury, although a few defined personal-injury offenses are written back in (covered in 8.4).
- Absolute (strict) liability — liability without proof of fault, imposed for ultrahazardous activities (blasting, keeping dangerous animals) or under product-liability law.
Trap: a question describing a deliberate punch tests intentional-tort exclusion; a question describing dynamite blasting tests strict liability. Do not default every fact pattern to ordinary negligence.
The four elements of negligence
To recover for negligence, a claimant must prove all four elements. Miss one and the claim fails, and the liability policy owes nothing because there is no legal obligation to indemnify.
| Element | Question it answers |
|---|---|
| Legal duty | Did the defendant owe a duty of reasonable care? |
| Breach of duty | Did the defendant fail to meet that standard of care? |
| Proximate cause | Was the breach the direct, unbroken cause of the harm? |
| Damages | Did the claimant suffer actual, measurable injury or loss? |
Worked example: a shopkeeper owes a duty to keep aisles safe (duty), leaves a spill unmarked for an hour (breach), a shopper slips on that exact spill (proximate cause), and breaks a wrist requiring 4,200 dollars of treatment (damages). All four are present, so legal liability attaches and the CGL responds. If the shopper tripped over their own shoelace with no spill present, proximate cause fails and the policy owes nothing.
Standard of care and the "reasonable person"
Breach is measured against the reasonable person standard — what a prudent person would do under the same circumstances. Professionals (physicians, accountants, attorneys) are held to a higher standard of care within their field, which is why they carry professional liability rather than relying on the CGL.
Res ipsa loquitur ("the thing speaks for itself") lets a claimant infer breach when the harm would not normally occur without negligence and the instrumentality was under the defendant's exclusive control — for example, a surgical sponge left inside a patient. The burden of disproving negligence then effectively shifts to the defendant.
A jury finds that a store owner owed a duty of care, breached it by leaving a spill unmarked, but concludes the customer fell because of an unrelated medical fainting episode, not the spill. Why does the store's CGL policy owe nothing?
An insured deliberately punches a heckler at an event. Why is this unlikely to be covered by a standard CGL?
The Four Elements of Negligence
Negligence is the foundation of most liability claims, and the exam expects all four elements proven together - missing any one defeats the claim:
| Element | Question It Answers |
|---|---|
| Duty | Did the defendant owe a legal duty of care? |
| Breach | Did the defendant fail to meet that standard of care? |
| Proximate cause | Did the breach directly and foreseeably cause the harm? |
| Damages | Did the claimant suffer actual, measurable injury? |
Proximate cause is the most-tested element: there must be an unbroken causal chain, and an unforeseeable intervening cause can break it and relieve the defendant. If a defendant owed no duty, or the claimant suffered no actual damages, there is nothing for the liability policy to indemnify.
Three Categories of Tort
Torts - civil wrongs other than breach of contract - fall into three buckets the exam contrasts:
- Negligence (unintentional) - the carelessness category that standard liability policies are built to cover.
- Intentional torts - assault, battery, false imprisonment, defamation; standard liability forms exclude intentional injury, though some are picked up by Coverage B personal/advertising injury.
- Absolute (strict) liability - liability without fault for abnormally dangerous activities (blasting, keeping wild animals) or, in product cases, for defective products regardless of negligence.
Liability can also arise by contract (assumed under a hold-harmless agreement) or by statute (dram-shop laws, workers' compensation). The CGL keys its promise to amounts the insured becomes legally obligated to pay as damages, which is why a defendant found 0% at fault triggers no indemnity.
A property owner is sued after a visitor slips on an icy walk. The court finds the owner owed a duty, breached it, and the fall directly caused a broken wrist with medical bills. Which negligence element makes the claim actionable beyond duty, breach, and cause?