CPCU 530 key terms

A civil wrong, other than a breach of contract, that causes harm and gives the injured party a right to sue for damages. Negligence, defamation, and trespass are common examples.

Failure to exercise the care a reasonable person would use under similar circumstances, which causes harm. A claimant must prove duty, breach, causation, and damages.

The legal obligation to act reasonably toward others so as to avoid foreseeable harm. Whether a duty exists is a question of law decided before breach is considered.

The degree of caution and competence the law requires in a given situation, usually measured against a hypothetical reasonable and prudent person with similar knowledge and skill.

A cause closely enough connected to an injury that the law treats the harm as attributable to the defendant. It limits liability to consequences that are a natural and foreseeable result.

The cause-in-fact link between conduct and harm, often tested by asking whether the injury would have occurred but for the defendant's act. It is separate from proximate cause.

Liability imposed without proof of fault or negligence. It commonly applies to abnormally dangerous activities and to defective products, and it is the theory behind most workers compensation.

The area of law holding sellers and manufacturers responsible for harm caused by defective products. Theories include negligence, breach of warranty, and strict liability.

Money awarded to make an injured party whole by covering actual losses such as medical bills, lost wages, and pain and suffering. They are distinct from punitive damages.

An award above and beyond actual loss, intended to punish egregious conduct and deter similar behavior. Because they are penal in nature, many insurance policies exclude or limit coverage for them.

A legally enforceable promise or set of promises. Formation generally requires offer, acceptance, consideration, and mutual assent by parties with capacity, for a lawful purpose.

Something of value exchanged by each party that makes a promise enforceable. In insurance, the premium is the insured's consideration and the promise to pay covered claims is the insurer's.

The mutual exchange in which one party proposes terms and the other agrees to them exactly. A qualified or conditional response is generally a counteroffer rather than an acceptance.

Failure to perform a contractual promise without legal excuse. The nonbreaching party may seek damages, specific performance, or other remedies depending on the nature of the breach.

Contract terms that make a duty to perform dependent on the occurrence of an event or the existence of a state of affairs. In insurance, coverage often depends on conditions such as notice.

A statement or promise in a contract that is part of the agreement itself. In insurance, breach of a warranty may allow the insurer to deny a claim regardless of materiality.

A statement made by an applicant before a contract is formed that induces the insurer to issue the policy. It is generally not part of the contract and must be materially false to matter.

A false or misleading statement of fact. In insurance, a material misrepresentation on an application may let the insurer rescind the policy or deny a claim.

Intentional failure to disclose a material fact that the applicant has a duty to reveal. It differs from an innocent omission and can give the insurer grounds to avoid the policy.

The principle that insurance parties must deal honestly and disclose material information. It underlies the insurer's duty to act fairly and the applicant's duty not to conceal facts.

Voluntary relinquishment of a known right. An insurer that knowingly ignores a policy condition, such as late notice, may waive its ability to rely on that condition later.

A rule preventing a party from asserting a right after its conduct led another party to rely to that party's detriment. It can bar an insurer from denying coverage it appeared to grant.

A relationship in which one person is authorized to act on behalf of another and bind that person legally. In insurance, agents bind insurers through actual or apparent authority.

Authority a third party reasonably believes an agent possesses because of the principal's words or conduct, even if actual authority is absent. Insurers can be bound by acts of apparent agents.

A legal obligation to act solely in another party's interest, with loyalty and candor. Insurance agents and brokers may owe fiduciary duties to clients when handling premiums or placing coverage.

Restoration of a person to the financial position held before a loss, no better and no worse. It is the guiding principle behind property insurance valuation and many liability coverages.

A financial stake in the person or property insured such that a loss would cause genuine economic harm. Its presence is required for a policy to be enforceable and prevents wagering.

An insurer's right, after paying a claim, to pursue the responsible third party in the insured's place. It supports indemnity by preventing double recovery and shifting loss to the wrongdoer.

A law setting a deadline for filing a lawsuit or claim. Missing the deadline generally bars the action, and policies may require prompt notice or suit within a stated period.

A doctrine allowing negligence to be inferred from the mere occurrence of an accident when the instrumentality was under the defendant's exclusive control and the event would not normally happen without negligence.

A rule that reduces a claimant's recovery in proportion to the claimant's own share of fault. Under contributory negligence, by contrast, any claimant fault can bar recovery entirely.

A defense asserting that the injured party knowingly and voluntarily accepted a known danger. It can bar or reduce recovery and often arises in recreational and sports injury cases.

The body of law governing the duty a property owner or occupier owes to people on the premises. The duty varies with the visitor's status as trespasser, licensee, or invitee.

Legal responsibility imposed on one party for the acts of another, typically an employer for an employee's acts within the scope of employment. It does not require the employer's own fault.

The right of one party who paid a loss to recover a share from other parties also legally responsible for the same loss. Insurers use it to allocate loss among concurrent policies.