Chapter 2 – Insurance Basics: Law and Liability
“What’s the use of running when you’re not on the right road?” J. Beilenson |
Introduction
Before we discuss specifics concerning the Automobile Policy, it is important to remember that Automobile Insurance deals with both issues of law and liability. We will discuss:
also summarize the different types of insurance. We conclude the chapter with a study of the effect laws (Criminal and Civil) have on Liability and the Tort System in general.
Insurance Basics
Insurance exists because the world is filled with uncertainty. Every day each individual experiences some uncertainty due to the unpredictability of weather, political events, activities of co-workers and even actions of our families and friends. Some of these uncertainties can lead to financial loss.
Loss Exposures
A Loss Exposure is a condition of susceptibility or vulnerability to loss, i.e., the possibility of loss. A Loss Exposure exists if there is a possibility of a loss occurring and if such an occurrence would
cause a financial loss. It is the possibility (not a certainty of a financial loss) that creates insecurity and the need for insurance. Every Loss Exposure has three elements:
Example: operating a car is a Loss Exposure to the driver even if someone else owns the car. The car, its occupants and occupants of other cars are subject to injury or damage if a collision occurs. The peril (cause of loss) is the claim for payment presented by the injured persons. The drivers' legal responsibility to injured persons and damaged property may result in a large financial loss.
Techniques for Treating Loss Exposures
When a family discovers and analyzes its Loss Exposures, they must decide how these Loss Exposures will be treated. The major techniques/methods for treating loss exposures are:
It is quite common for families to use more than one technique for each identified Loss Exposure. Insurance policies often incorporate a form of Retention, as well as, insurance. An example is the collision deductible on an Auto Insurance Policy. Also, insurance company underwriters sometimes require insureds to adopt safety measures as a condition of an insurance policy. Such safety measures are a form of Loss Control.
Avoidance - When feasible, Avoidance is the most effective technique for Treating Loss exposure. Avoidance means a family or individual avoids potential losses by choosing not to own certain property or engage in certain activities. To avoid the auto loss exposure, one must not drive or own a car!
Loss Control - Losses can be controlled through:
1. loss prevention (lowering the frequency of loss).
2. loss reduction (lowering the severity of the losses).
3. a combination of both 1 and 2.
Loss Frequency - Refers to how often a loss occurs or how many losses occur during a given time period.
Loss Severity - Refers to the size of the losses that have occurred or might occur in the future.
The practice of “defensive driving” is an example of loss prevention. It can lower the number of accidents that take place. Wearing seat belts is an example of loss reduction. It cannot prevent an accident from occurring but it may lower the size of the loss, the extent of injury and the resulting medical expenses and recovery time. Unlike avoidance, loss control does not eliminate the possibility of loss. Some chance of loss remains although it may be minimized. In this regard, insureds, their insurance companies and agents share a common goal: prevention or reduction of losses and, consequently, the total cost of losses.
Retention - Retention means keeping or absorbing all or part of the financial impact of a loss. Examples are when an insured decides on a high deductible in order to keep the premium affordable. By having a high deductible (i.e., $500-$1,000) the insured is retaining the first $500-$1,000 of a loss. Retention is not merely a last resort; it can be the most cost-effective way to deal with high frequency (occurring often) and low severity.
Transfer Other-Than-Insurance - Transfer Other-Than-Insurance occurs when the loss exposure of one person or organization is assumed by another, usually through a contract such as a "Hold Harmless Agreement". Example: would be a contract between a softball team and its sponsor absolving the sponsor from any liability for injury, the sponsor has thus transferred its liability to the team itself.
Insurance - Insurance is a system that enables a person, business or organization to transfer a Loss Exposure to an insurance company that indemnifies the injured for covered losses and provides for the sharing of the cost of losses among all insureds. The key element of this method for treating Loss Exposures is transfer and sharing.
Transferring Loss Exposures - By transferring their Loss Exposures to insurance companies, insureds exchange the possibility of a large loss for the certainty of a much smaller, periodic premium (the insured's payment for insurance coverage). The transfer is accomplished through Insurance Policies (also called Insurance contracts). An Insurance Policy is a contract that states the rights and du-ties of the insurance company and the insured.
Sharing the Cost of Losses - Sharing, like transfer, is another element of insurance. Each insured pays its insurance premium to the insurance company that "pools" the premium into a loss fund. The total cost of losses is spread among all insureds insurance companies who predict future losses and expenses to determine how large a pool of funds will be necessary. They can do this because of the Law of Large Numbers, the foundation of insurance operations.
The Law of Large Numbers is a mathematical principle that states: when the number of similar, independent (not subject to the same loss event) exposure units (such as cars or houses) increases, the relative occurrence of predictions about future outcomes (losses) based on these exposure units also increases. This principle enables insurance companies to improve the predictability of losses by pooling a large number of similar independent exposure units. The Law of Large Numbers reduces the uncertainty and increases the accuracy with which the insurance company can predict the number of car accidents for all their insureds. This idea involves two distinct measures:
1. the probability (or chance) of an event occurring.
2. the uncertainty connected with the occurrence or non-occurrence of that event. Insurance is designed to reduce uncertainty by accepting Transfers of Loss Exposures and improving predictability through the Law of Large Numbers. Insurance does not reduce the underlying probability of the event occurring.
Benefits of Insurance
The most obvious benefit of purchasing insurance is that it provides payments for losses and reduces uncertainty. Auto Insurance is designed to reduce many of the financial losses that could otherwise result from owning or operating an automobile. Without such insurance, a person would have to bear the entire cost when accidental injuries or damages occur. Another benefit of insurance is that it reduces social burdens. Uncompensated accident victims can be a serious burden for society. Insurance helps to reduce such burdens by providing compensation for lost wages, medical expenses and death benefits to survivors. Examples: are Worker Compensation Insurance to aid injured workers without regard to fault, and Compulsory Auto Insurance to provide a minimum level of compensation to all accident victims.
Types of Insurance
Although there are numerous types of insurance to protect the needs of individuals, we will focus on two which are pertinent to our subject matter: Property Insurance and Liability Insurance.
Property Insurance - Property Insurance covers accidental losses resulting from damage to property of the injured. The injured could be an individual insuring an automobile or a business providing coverage for its fleet of vehicles. When the insured experiences a loss, such as a car accident, the insured deals directly with the insurance company in the settlement process. Many types of insurance are classified as Property Insurance. Examples of Property Insurance are:
As we will see later, Auto Physical Damages Insurance is usually part of a policy that also covers Auto Liability. It covers loss or damage to the vehicle itself from collision, fire, theft or other perils.
Liability Insurance - Liability Insurance, unlike Property Insurance, can involve three parties: the insured, the insurance company and someone who is injured or whose property is damaged by the insured. The insurance company pays the claimant on behalf of the insured if the insured is legally liable for injury or damage due to negligence. Example: assume that Fred Dwyer has an auto accident on his way to work. If his own car is damaged, he makes a Property Insurance Claim directly with his own Property Insurance. If Fred goes through a red light and causes an accident, which damages another car and injures its driver, he is legally liable or responsible for this damage to the person and property of a third party. His Liability Insurance Policy would pay for damages to the other driver on behalf of Fred, the party legally responsible for those damages. Examples of Liability Insurance are:
Since we are discussing the Personal Auto Policy in the course, we will cover just auto Liability Insurance.
Auto Liability Insurance - Auto Liability Insurance covers losses due to the insured's liability for bodily injury to others or damage to property of others caused by an auto accident. The legal costs of defending the insured are also covered. The various types of Auto Insurance Policies (Personal Auto Policy, Business Auto Policy) combine Auto Liability Coverage with Auto Physical Damage (a form of Property Insurance) in one package for convenience and expense savings. We will discuss this in detail later.
In summary, it is important to remember that insurance helps people to cope with the uncertainties in their lives. Many events are beyond their control. They have no way of knowing when, or if, the events might occur, but unexpected events can have severe financial consequences. The uncertainty about such possibilities diminishes one's peace of mind and threatens one's financial security. Insurance is one important way of coping with these possibilities.
Law and Liability
Nature of the Law - It is the legal system that enforces obligations, so an understanding of the law helps in recognizing Liability Loss Exposures. Complex legal questions require the professional expertise of an attorney. Some fundamental legal terms and concepts are essential knowledge for anyone dealing with Liability Loss Exposures or Liability Insurance.
Laws exist in a civilized society to enforce certain standards of conduct. By placing limits on the freedom of some individuals, laws protect all other individuals. The balance between individual liberty and community welfare expressed in a particular law reflects a general social consensus regarding the needs and values of the time. However, societies view of the proper balance sometimes changes. Consider the automobile seatbelt for example. On this issue, American public opinion in recent times shifted in the direction of greater safety at some sacrifice to individual liberty. Laws now exist requiring certain standards of conduct such as mandatory use of seatbelts. Laws are not necessarily static. They evolve over time to meet the needs of society while the law generally makes the world safer and more secure. It also imposes certain responsibilities. Where there are rights, there are also duties. Each individual must accept the constraints of the law in order to have the benefits of the law. The law accomplishes its objectives by holding people responsible for their conduct.
An important distinction exists in the American legal system between criminal Law and Civil law. While Criminal Law cases receive more headlines, insurance-related cases are more likely to involve Civil Law.
Criminal Law - Certain kinds of conduct so endanger the public welfare that society makes laws to prohibit them. Examples: laws prohibit murder, rape, robbery, arson, fraud, theft and driving while intoxicated. Such offenses are crimes that are punishable by fines, imprisonment, or in some circumstances, even by death. Since our focus will be on Liability Loss Exposures, we will focus on Civil law.
Civil Law - Actions that are not necessarily crimes can still cause considerable harm to other people. Civil Law serves to settle disputes and to repress wrongs against individuals. In the absence of laws, a dispute between neighbors can turn into a never-ending feud. Civil Law proceedings provide a forum for hearing the dispute and rendering a decision binding on both parties. This procedure enables individuals to enforce the rights that have been infringed upon by others. The law protects the privacy of another and protects the reputation of another person. By protecting such personal rights, the law contributes to everyone's safety.
Civil Law also enforces rights. People are more willing to make agreements of contracts with one another when they know that those contracts are, in fact, enforceable. If two parties make a contract but one party does not honor it, the other party can ask the court to compel adherence to the contract or pay dam-ages. This possibility of seeking justice from a higher authority promotes commerce by making contracts much more reliable. In Civil Law proceedings, the aggrieved party must bring the case to court, usually by hiring a lawyer or going to small claims court where lawyers are not necessary.
Sources of Law
There are essentially four sources of law. Constitutional law, Statutory Law, Common Law and Administrative Law all govern American society.
Constitutional Law - The constitution specifies the structure of the federal government and outlines the respective powers of the legislative, executive and judicial branches of the government. All other laws must conform to the Constitution. The courts interpret the Constitution to decide Constitutional issues that may arise. If the Supreme Court decides that a particular law conflicts with the Constitution, that law becomes invalid. The Supreme Court is the highest level of appeal.
Statutory Law - Legislatures at national, state, and local levels enact laws or statutes to deal with perceived general problems. At the national level, Congress considers many proposed new laws each year. State legislatures and town council also make new laws. Collectively, these formal enactment’s of legislative bodies are referred to as Statutory Law.
Common Law - In contrast, the Common Law has evolved in the courts by the force of custom. When the king's judges began hearing disputes in medieval England, they had little basis for their decisions except common sense and the prevailing notions of justice. Each decision, however, became a precedent for similar cases in the future. Gradually, certain principles evolved that the king's judges applied consistently to all the cases they heard. These principles became known as Case Law or Common Law.
These Common Law principles guided judges not only in England but also in the English colonies in America. The English Common Law heavily influenced the American legal system. When neither Constitutional nor Statutory Law applies, judges still rely on precedents of previous cases on reaching their decisions. In many areas, legislation now exists that modifies or replaces Common Law principles but Common law is still important in matters of legal liability.
Administrative Law - Final sources of the law are the numerous federal, state and legal governmental agencies that have regulatory powers derived from Statutory Law. Examples: the National Labor Relations Board, the Federal Trade Commission and the Environmental Protection Agency. These regulatory bodies issue detailed rules and regulations covering a particular public concern.
Elements of a Liability Loss
Statutory Law, common law or administrative law could provide a basis for finding of legal liability. However, there must be some standard in law against which the conduct of the liable person can be measured. Thus, the law plays a crucial role in Liability Loss.
While one party may or may not recognize its responsibility for some harm to another party, it is the legal process that enforces the liability. The legal process confirms the responsibility for the harm and determines the appropriate restitution. The factors involved in a Liability Loss include:
Legal Rights of Recovery
For an injured party to have a Right of Recovery from another party, some principle of law must create a link between the two parties. Often this link appears in the Law of Contracts.
Torts
Long ago the word 'tort' meant any kind of wrongful act. Legal practice has narrowed the meaning. Torts do not include acts such as, white lies that may be morally wrong but do not lead to legal action. Crimes, wrongs against society rather than merely against a particular individual, differ from torts because Criminal Laws deal with crimes and Civil Law does not. Almost any other wrong may be a tort; therefore, Tort Law is that branch of Civil Law that deals with wrongs other than Breaches of Contract.
A wrong usually leads to legal action only when some damage or injury results and the issues are who must pay for these consequences? Tort Law still rests partly on Common Law because courts determine responsibility in such cases according to the prevailing theories of justice and the precedents of previous cases. Like other areas of Common Law, Tort Law evolves over time as courts seek solutions to new problems that arise in a changing society. As expectations of safety and security rise and injuries become more costly, Tort Law becomes increasingly more important as a means of determining responsibility for injury.
Tort Law provides three possible standards for a finding of legal liability: if a tort is intentional, the liability for the consequence follows, if a tort is unintentional, Negligence may be grounds for a finding of legal liability. Finally, some activities are so inherently dangerous that Absolute Liability for any resulting injuries may exist even though no harm is intended and no Negligence is involved.
Intentional Torts - Deliberate acts that cause harm to another person, regardless of whether the harm is intended, are called Intentional Torts. A common example of an Intentional Tort is defamation of character, which includes both libel and slander. Libel occurs when someone prints and distributes an untrue defamatory statement about another person. Distribution of misleading cartoon or pictures can also constitute libel.
Slander is a spoken defamatory of truth about another person. Except for words spoken on radio or television, printed words usually have greater distribution and stay in circulation longer than spoken words. Therefore, liability judgments for libel tend to be greater than the amounts awarded for slander.
Absolute Liability - Finally, some activities are so inherently dangerous that Absolute Liability for any of these actions that result in an injury may exist even though no harm is intended and no negligence is involved.
Negligence
While such Intentional Torts may lead to liability judgments, by far, the greatest numbers of liability cases arise from Negligence. Negligence occurs when one fails to exercise the appropriate degree of care. It usually involves acting differently than a reasonable prudent person would under similar circumstances. Tort Law enables injured parties to obtain compensation if they can demonstrate that someone else's negligence led to their injury.
Elements of Negligence
A liability judgment based on Negligence depends on four elements:
1. Duty To Act that is owed to another person.
2. A Breach of that Duty.
3. The occurrence of an Injury.
4. An Unbroken Chain of Events leading to that injury.
Duty to Act - A driver has a duty to operate a car safely. One party will not be held responsible for another's loss if the first party does not owe the second party a legal duty. The duty usually stems from a specific relationship between the parties. Example: if Mae goes swimming and Jim sees her drowning, Jim owes Mae no legal duty to try to save her. If she drowns, Jim is not responsible for her death. However, if Jim is a lifeguard at the pool where Mae is swimming, then Jim has a duty to protect Mae and so does his employer.
Breach of Duty - In order for a person to be held negligent, a breach of the duty owed must occur. A breach of duty is the failure to exercise the degree of care expected of a reasonable person in that situation. Stores are often held liable when a customer slips on a wet floor. When someone is accused of Negligence, a judge or jury decides whether there was a breach of duty owed by determining what a reasonable person would do to prevent harm in the same situation. Different standards of care are expected in different situations. When entertaining guests in their homes, hosts have a duty to protect them from harm. Not only must the host warn the guests of any danger but the host must also take steps to see that the guests are not harmed. Example: someone owning a large, aggressive dog must see that the dog is properly confined when guests arrive. Just telling the guests that the dog is vicious is not enough to meet the standard of the care required. If the dog attacks a guest sitting in the living room, the host will be held responsible for the injuries.
Injury - The third element of Negligence is that definite injury or harm must actually occur to the claimant. There may be a legal Duty to Act and a Breach of That Duty but unless someone suffers injury, no recovery can be made based on Negligence. Example: suppose in rushing to work, Bob drives his car 80 miles per hour on a city street and passes a stopped school bus with its red lights flashing as it loads a group of elementary school students. He has a duty to obey the traffic ordinances of his community and to use reasonable care under the circumstances. He has done neither, but unless his careless driving injures a third party, no one has a basis of recovery in Tort Law. Bob may be arrested and prosecuted under Criminal Law but that is a separate issue. If his careless driving injures someone, Bob has committed both a crime and a tort by the same act and separate trials may take place.
Unbroken Chain of Events - A finding of Negligence also requires that the Breach of Duty initiate an Unbroken Chain of Events leading to the injury. The Breach of Duty must be the proximate cause of the injury. Example: Bob injures a child alighting from the school bus. His careless driving is the proximate cause of the injury. When one passes a properly stopped school bus at a high rate of speed and hits a child, there is a direct casual relationship between the driver's action and injury to the child.
Responsibility of Negligence
Individuals, business firms and other organizations may be held responsible for Negligence. Generally one expects the person whose conduct is negligent to be responsible for the consequences. This person may be called the Tortfeasor, the wrongdoer or the negligent party. All three terms mean that the person involved does something that a reasonable person would not do under similar circumstances. Besides the person who actually commits the act, the persons or organizations may be held responsible for the wrongdoer's action. This responsibility is called 'Vicarious Liability'. It is also possible for two or more parties to be jointly liable. If so, they are Called Joint Tortfeasors.
Vicarious Liability - exists when one is held liable for the actions of another person. Such situations extend liability to include not only the actual wrongdoer but also a person or organization responsible for the wrongdoer. Where this is not the case, business organizations could escape liable for negligence since a person must act on behalf of a business organization for that entity to perform any act.
Vicarious Liability often arises in business situations from the relationship between employer and employee. A person at work performing work-related activities is generally acting on behalf of the employer. Therefore, the employer is vicariously liable for the action of the employee. When an employee drives a customer to a luncheon meeting; has an auto accident and causes injury to the customer, both the employer and employee may be held liable. The responsibility does not shift to the employer but it extends to include the employer as well. Parents can be held vicariously liable for the action of their children who are engaging in an activity on behalf of their parents. If the Green's 14 year-old cuts the grass and loses control of a power mower which injures the foot of the White's 6 year-old son, the Green's could be held liable for their son's actions.
Joint Tortfeasors - In certain situations, more than one person or organization may be held liable for harm suffered by another. Since an employer could be Vicariously Liable for the acts of an employee, an injured party might bring suit against both the employee and the employer. Someone injured by a defective product might seek to hold both the seller and the manufacturer of a defective product responsible. In such cases, the employee and the employers, or the seller and the manufacturer are Joint Tortfeasors.
When Joint Tortfeasors are held liable for a person's injury; a problem can arise in determining how the Joint Tortfeasors should share the costs of compensating the injured person. According to the principle of Joint and Several Liability, a principle that applies to Tortfeasors in some states, each wrongdoer is fully responsible for the consequences of the wrong and each is responsible independently or separately from the others. Example: an accident on a construction site could lead to a liability judgment against three local construction firms working on the project and a multinational corporation that owned the property. The three local construction firms may be bankrupt by the time the case comes to court. If so, under the principle of Joint and Several Liability, the multinational corporation will have to pay all of the damages even though its responsibility for the accident was slight in comparison to that of the construction firms.
Absolute Liability - Although most cases arise from Negligence, liability under Tort Law is not entirely limited to cases of injury caused by deliberate or negligent conduct. In certain other situations, Tort Law may give injured persons a right of recovery. In these inherently dangerous situations, there is Absolute Liability for any injury regardless of the intent or the carefulness of the person held liable. The situation itself, rather than the person's conduct become the standard for determining liability. Example: the owner of a wild animal, e.g., a pet rattlesnake or a circus lion, is liable for any injury the animal inflicts regardless of the precautions taken. Even the family’s pet dog may be considered a dangerous animal if it has a history of attacking strangers or is a known viscous Breed. Absolute Liability exists and a person attacked by the vicious dog would not have to demonstrate negligence on the part of the owner in order to claim restitution for injuries.
Strict Liability - A similar but slightly different concept often applies in cases of injury involving defective products. The Strict Liability doctrine eases the injured person's burden of proof in that he can recover from the manufacturer by showing that the product causing the harm was unreasonably dangerous, even if the manufacturer was not negligent. Thus, Strict Liability can have almost the same effect as Absolute Liability in holding someone responsible merely because of the outcome.
Contracts
Tort Law enables an injured person to seek restitution from a wrongdoer because the wrongdoer has breached a duty generally recognized in the law, such as the store's duty to provide safe conditions for customers, or because the law generally holds a person responsible in a particular situation. Contract Law enables an injured person to seek restitution because the other party has breached a duty voluntarily accepted in a contract. A contract is a legally enforceable agreement between two or more parties in which each makes some promise and the other may go to court to enforce the contract.
Statutes
Liability may also exist because of a specific Statute. Even though Common Law may have covered the situation, Statutory Law has extended, restricted or clarified the rights of insured parties in certain situations. One reason for such legislation is the attempt to assure adequate compensation for injuries without lengthy disputes over who is at fault.
Prominent Examples of this kind of Statutory Liability, in place of Common Law, involve Automobile Liability Laws and Workers’ Compensation Laws. In these areas, it is a specific statute rather than the principles of torts or contracts that give one party the right of recovery from another, or that restrict that right of recovery.
Automobile Liability Laws
Automobile accidents are among the leading cause of injury in the United States. As a result, state legislatures frequently struggle to improve the system for distributing the staggering costs of those accidents. Specific statutes now modify many of the common law principles of Negligence that apply to the Common Law principles of Negligence that apply to automobile accidents. Since these laws are enacted by state legislatures, the provisions vary considerably from state to state. In an effort to reduce the number of lawsuits, many states have experimented with so called "No-Fault" Laws.
These laws recognize the inevitability of minor automobile accidents and eliminate the Right to Sue the other party in an accident, except in more serious cases defined by some standards in the law. Victims with less serious injuries collect their out-of-pocket expenses from their own insurance company without the need for expensive legal proceedings.
Damages
For a Liability Loss to occur there must be some definite harm sustained by another person. Compensatory damages are intended to compensate the victim for the harm suffered. A damage award is usually the amount of money judged equal to the victim's loss. That is the amount the party held liable will have to pay.
Occasionally, a court may award punitive damages as well because the conduct of the wrongdoer is particularly outrageous. By making the wrongdoer pay more than merely the amount required compensating the victim, the court makes an example of the outrageous conduct in order to discourage its repetition. Thus, the amount of a Liability Loss includes, but can be greater than, the total losses sustained by the victims.
Bodily Injury
Bodily injury is a physical injury to a person. Bodily injury losses the liable party can expect to pay include: hospital bills, physician's fees, lost income and rehabilitation expenses of the injured party. In legal terminology, payments covering such costs are called Special Damages. In addition to these direct costs, the liable party may also be required to pay General Damages for pain and suffering and loss for consortium. Pain and suffering are awarded for the physical and mental pain and suffering that a person incurs because of the Bodily Injury. Example: when a person is badly burned on the face and arms, for example, general damages compensate the injured party for the physical pain and the potential disfigurement, as well as for mental suffering.
Property Damage
Property Damage Losses occur when a person causes direct or indirect damage (such as loss of the use of property) to another person's property. Property Damage awards is normally limited to the value of the damaged property, loss of income due to the damage and additional expenses that occur because of damage. Example: in an auto accident there may be damage to the auto, loss of income because the owner could not use the car for business on the day of the accident, and an increase in operating expenses because the owner must rent a replacement car.
Defense Costs
Defense Costs include not only the fees paid to lawyers but also all other expenses associated with the defense of a Liability Claim. These expenses can include wages the defendant loses to attend and prepare for the trial, investigation expenses, witness fees, the cost of appeal bonds and other expenses the defendant incurs in preparing for the trial.
Valuation of Liability Losses
The Valuation of Liability Losses is not nearly as exact as the Valuation of Property Losses. If the parties do not reach a settlement out of court, the judge or jury may decide the amount of the defendant’s liability. In a Bodily Injury Claim, medical bills, lost income, extra expenses, loss of consortium, pain and suffering and possible punitive damages are all represented to the jury for their decision.
As we finish this chapter, it is important to note the importance of Automobile Insurance when reviewing Liability Exposures. Keep in mind that automobile accidents produce the greatest number of liability claims and account for most of the liability awards over $1,000,000. Even people or business firms not owning an auto can be held Vicariously Liable for the operation of an auto by others!
Chapter 2 - Review Questions
1. Financial losses result when property is:
A. destroyed
B. damaged
C. stolen
D. all of the above
2. An element of every loss exposure would be:
A. potential financial impact of the loss
B. total liability of the insured
C. both A and B
D. none of the above
3. Technique(s) for treating loss exposure would be:
A. retention
B. avoidance
C. both A and B
D. none of the above
4. What type of insurance could involve three parties?
A. Property
B. Liability
C. Worker's Compensations
D. None of the above
5. Almost any wrong may be a:
A. slander
B. defamation
C. punitive
D. tort
ANSWERS
1. D
2. A
3. C
4. B
5. D