Legal Liability, Negligence & Torts

Where Legal Liability Comes From

Legal liability is a responsibility enforceable by a court - usually the obligation to pay money for harm you caused another party. Casualty and liability insurance exists to transfer that financial risk. The exam wants you to recognize three sources of liability.

• Torts - civil (not criminal) wrongs against a person or their property. Torts may be intentional (assault, libel, slander) or unintentional. The unintentional tort of negligence is the engine of most liability claims and the focus of casualty insurance.
• Contracts - liability assumed by agreement. A business that signs a lease promising to indemnify a landlord has assumed contractual liability.
• Statutes - liability imposed by law, such as workers' compensation benefits an employer owes regardless of fault.

Liability insurance responds primarily to unintentional torts, because intentional harm is generally excluded - insurers will not let an insured profit from a deliberate act.

Three more distinctions appear on the exam. Negligence is doing what a prudent person would not do, or failing to do what a prudent person would do. Gross negligence is an extreme, reckless disregard for the safety of others and is what often triggers punitive damages. Absolute (strict) liability removes the need to prove fault at all for ultra-hazardous activities. Finally, the statute of limitations caps how long after an injury a plaintiff may sue.

The Four Elements of Negligence

Negligence is the failure to use the degree of care a reasonably prudent person would use under the same circumstances. The reasonable person standard is the yardstick a court uses - it asks what an ordinarily careful person would have done, not what this particular defendant intended. To win a negligence claim, the injured party must prove all four elements. If even one is missing, the claim fails - a favorite exam trap.

1. Duty of care - a legal obligation to act (or refrain from acting) toward others. A driver owes other motorists a duty to drive safely; a store owes customers a reasonably safe premises.
2. Breach of duty - the defendant failed to meet that standard of care (ran a red light, left a spill unmarked).
3. Proximate cause - an unbroken chain of events connecting the breach directly to the harm. The injury must be a reasonably foreseeable result of the breach, not a freak intervening event.
4. Damages - actual, measurable harm. Without injury or loss there is no claim, no matter how careless the conduct.

A memory device is D-B-C-D: Duty, Breach, Causation, Damages. Watch for questions where the facts show carelessness but no actual injury - that is not negligence because the damages element is missing.

Two causation ideas refine element three. Proximate cause (also called legal cause) asks whether the harm was a foreseeable result of the breach. An intervening cause - an unforeseeable event that breaks the chain - can relieve the original wrongdoer of liability. The doctrine of res ipsa loquitur ("the thing speaks for itself") lets a court infer negligence when an accident is of a type that ordinarily does not happen without carelessness and the instrument was in the defendant's exclusive control - shifting the burden to the defendant to explain.

Defenses, Special Liability Doctrines, and BI vs PD

Defendants can defeat or reduce a negligence claim with recognized defenses, and certain doctrines impose liability even without ordinary fault.

Bodily injury (BI) is physical harm to a person - injury, sickness, or death. Property damage (PD) is physical injury to or loss of use of tangible property. Liability limits are frequently expressed separately for BI and PD, so you must keep the two categories straight.

Damages and the Role of Liability Insurance

When liability is established, a court awards damages. The exam distinguishes two broad classes.

• Compensatory damages restore the injured party to their prior condition. They split into:
  • Special (specific) damages - measurable economic losses with a receipt or invoice: medical bills, lost wages, repair costs.
  • General damages - intangible losses with no fixed dollar amount: pain and suffering, disfigurement, loss of consortium.
• Punitive (exemplary) damages punish the wrongdoer for willful, malicious, or grossly negligent conduct and deter others. They are often uninsurable by law or excluded, because letting insurance pay them would defeat their purpose.

Liability insurance promises two things. First, it pays sums the insured becomes legally obligated to pay as damages for covered BI or PD up to the policy limit. Second - and just as testable - it includes the duty to defend: the insurer hires and pays for the insured's legal defense, including attorney fees and court costs.

These defense costs are paid in addition to the policy limits (a "supplementary" or defense-outside-limits feature in most liability forms), and the insurer's duty to defend ends once it has paid out the applicable limit. The duty to defend is broader than the duty to pay - the insurer must defend even groundless or fraudulent suits if the allegations could fall within coverage.