Tort law and negligence liability
Tort law and negligence liability tests whether an insurance professional or another party owes a duty of care and whether breach caused the loss. The exam applies the four elements of negligence to insurance distribution and claims handling.
Elements of negligence
- Duty of care: established categories include professional advisers and insurers dealing with customers. The Caparo test asks whether harm was reasonably foreseeable, whether there was proximity, and whether it is fair, just and reasonable to impose a duty.
- Breach: the standard is that of the reasonable professional with the relevant skill. A specialist is judged by the standards of a reasonably competent specialist, not the highest expert standard.
- Causation: factual causation uses the 'but for' test; legal causation requires the damage not to be too remote.
- Damage: the claimant must prove recoverable loss, often financial loss in insurance disputes.
Defences and vicarious liability
- Contributory negligence reduces damages according to the claimant's share of responsibility.
- Voluntary assumption of risk and illegality may provide complete or partial defences.
- An employer may be vicariously liable for an employee's negligence in the course of employment; an independent contractor is generally not an employee.
Worked example
A broker fails to advise a client that flood cover is excluded. The client suffers flood damage. The client must show the broker owed a duty to advise on the scope of cover, that a reasonably competent broker would have highlighted the exclusion, and that the client would have bought flood cover if advised. If the client would have declined the extra premium even when warned, causation fails and the broker is not liable for the uninsured loss.
Traps that cost marks
- Finding a duty merely because loss occurred.
- Confusing factual causation with remoteness.
- Applying the highest expert standard instead of the reasonable professional standard.
- Ignoring contributory negligence and the client's own responsibility.