Lecture Nine:

Liability Insurance

Learning Objectives

Explain the major features of liability insurance.

Explain the law of negligence.

Apply the law of negligence to specific liability and professional liability

Describe the basic characteristics of current some liability insurance and contractual provision

Describe the status of liability insurance industry in the market of China

Main Contents

The concept and characteristics of liability insurance

The basic coverage provided by liability insurance

The basic coverage and characteristics of public liability insurance ， employer liability insurance ，and professional liability insurance

Case analysis

Conception of Liability Insurance

General liability refers to the legal liability arising out of business operations other than automobile or aviation accidents and employee injuries.

Basic Characteristics of Liability Insurance

Based on the sound legal system The insured subject is legal responsibility Characteristics of the Main Subject Insurance amount

Classification

Based on the different insured subjects, liability insurance is usually classified into the following types:

Public liability Insurance

Product Liability Insurance

Employer Liability Insurance

Professional Liability Insurance

The insured The owner of public sites and managers;

The manufacturers, wholesalers and retailers;

Drivers of mobile equipment owned;

Newly acquired or formed organizations.

Acceptance and Indemnity

IndemnityBodily injury and property damage liability

The insurer agree to pay on behalf of the insured all sums up to the policy limits that the insured is legally obligated to pay because of bodily injury and property damage to which the insurance applies

The insurer also pays the legal defense costs.

Liability risk

Basis of legal liability Law of negligence Specific application of the law of negligence

Liability risk

Basis of legal liability Each person has certain legal rights. A legal wrong is a violation of a person’s legal rights,

or a failure to perform a legal duty owed to a certain person or to society as a whole.

There are three broad classes of legal wrongs： Crime Breach of contract Tort

Liability risk

Torts can be classified into three categories: Intentional torts Absolute or strict liability Negligence

Intentional torts ： Legal liability arizing from an intentional act or omission that results in harm or injury to another person or damage to the person’s property.

Liability risk

Absolute Liability: means that liability is imposed regardless of negligence or fault. Absolute liability is also referred to as strict liability. Some absolute liability include : Occupational injury and disease of employees under a workers compensation lawBlasting operations that injure another personManufacturing of explosivesOwning wild or dangerous animalsCrop spraying by airplanes

Liability risk

Law of Negligence is defined as the failure to exercise the standard

of care required by law to protect other from an unreasonable risk of harm. Elements of a Negligent Act

To collect damages, the injured person must show four essential elements of a negligent act:

Liability risk

Existence of a legal duty ： the existence of a legal duty to protect other from harm.

Failure to perform that duty ： the failure to perform the legal duty required by law.

Damage or injury to the claimant ： damage or injury to the claimant （ including Special damages , General ,damages , Punitive damages)

Proximate cause relationship between the negligent act and the infliction of damages

Liability risk

Defenses Against Negligence Contributory negligence Comparative negligence (including pure

rule, 49percent rule , 50percent rule ) Last clear chance rule Assumption of risk

Liability risk

Imputed NegligenceExamples (textbook p60)

Res ipsa Loquitur Examples (textbook p60)

Specific Applications of The Law of Negligence

Property OwnersProperty owners have a legal obligation to protect others

from harm.

Three types have been recognized:

Trespasser Licensee invitee

Specific Applications of The Law of Negligence

Attractive Nuisance Doctrine Examples (p61,)

Owners and Operators of AutomobilesGovernmental Liability (more discussion)Charitable InstitutionsEmployer and Employee RelationshipsParents and ChildrenAnimals

Special Tort Liability Problems

Products Liability Products liability refers to the legal liability of

manufacturers, wholesalers, or retailers to persons who incur bodily injuries or property damage from a defective product.

Several solutions have been proposed or enacted to reduce the magnitude of the products liability problem. （ textbook p63)

Case discussion of Product Liability

Could Tracy and Janine get their claimed amount from the insurers? Why?

The story (see the attachment)

Special Tort Liability Problems

Professional Liability Professional liability is another important liability problem that merits discussion.

Medical Malpractice is improper or negligent medical treatment in the eyes of the law. （ the US cases)

Several approaches have been taken to solve the medical malpractice problem. （ textbook p65)

Special Tort Liability Problems

Attorneys Liability Attorneys are also vulnerable to lawsuits because of errors and omissions.

Because of a changing legal environment, clients today can often successfully sue their attorneys for malpractice.

Special Tort Liability Problems

Liability of Architects and Engineers Architects and engineers are also vulnerable to lawsuits..

This can be explained by several factors. （ textbook p65)

Two approaches are used to control this enormous liability exposure.

Special Tort Liability Problems

Director and OfficersDirectors and officer of corporations are also vulnerable to lawsuits.

Many suits against directors and officers are filed by disgruntled stockholders because of financial losses. .

Special Tort Liability Problems

Professional Liability in other fields Public accounting firms.

Pharmacists

Education institutions

Insurance agents

Reforming the Civil Justice System in U.S.

Defects in the Civil Justice System High costs and inefficiency Uncertainty of legal outcome Increased compensation awards Long delays in settling lawsuits

Cost of U.S. Tort System ($ Billions)

Reforming the Civil Justice System in U.S.

Tort reforms Regulation of attorney fees Limits on the maximum amounts paid as damage Penalties to deter frivolous suits and defenses Long delays in settling lawsuits Caps on non-economic damages, such as pain and

suffering Modifying the collateral source rule Modifying the joint and several liability rule

Summary

There are three categories of torts: intentional torts, absolute or strict liability, and negligence

Specific liability situations can involve property owners, and attractive nuisance, owners and operators of automobiles, governmental units and charitable institutions, employers and employees, parents and children, and the owners of animals.

Large numbers of physician have been sued for medical malpractice.

Other professionals have been sued in large numbers, including attorneys, accountants, architects, engineers, and insurance agents.

REVIEW QUESTIONS

1. Define the meaning of a tort and list the three broad classes of torts.

2. Define negligence. What are the essential elements of a negligent act?

3. Describe some legal defenses that can be used if a person is sued.

4. How does comparative negligence differ from contributory negligence?

5. Explain the meaning of imputed negligence.6. What is a vicarious liability law?7. Explain the meaning of res ipsa loquitur.

REVIEW QUESTIONS

8. Briefly describe the standard of care to protect others from harm for each of the following liability situations:a. Property ownersb. An attractive nuisancec. Owners and operators of automobilesd. Governmental units and charitable institutionse. Employers and employeesf. Parents and childreng. Owners of animalsh.. Identify the factors that have encouraged purchasers of defective

products to sue for damages.I. Explain some defects in the civil justice system in the United Statess.

Case Application

Case 1. Professional injury /accidents in the last five years in China

Case 2. Lawsuit result from an elevator accident happened a department store in Xi’an

Case Discussion

Case 3. 一起工伤责任保险纠纷

Case 4. 一起英国产品责任保险案

Case 5. 高压锅一爆三赔

Search for Information资料查询：

2008年发生在我国的三鹿婴幼儿奶粉事件造成的人身经济损失，相关部门是否购买产品责任险？此次事件中保险的赔付占比如何？

Preview

Read and prepare the questions from Text “Homeowners Insurance” (P129-165