Casualty Insurance Basics
Liability foundation
Liability rests on negligence: a legal duty owed, breach of that duty, proximate cause, and actual damages. Compensatory damages make the injured party whole (medical bills, lost wages, pain and suffering); punitive damages punish. Liability can also arise without fault through absolute liability (workers compensation, certain hazardous activities) and through vicarious liability (employer responsible for employees acting within scope).
Commercial and personal forms
The CGL has an occurrence limit, a general aggregate (often 2× the occurrence limit), and a separate products-completed operations aggregate. Occurrence policies respond to injury during the policy period even if the claim comes years later; claims-made policies respond to claims first made during the period and require a retroactive date. Extended reporting periods (“tail”) extend the reporting window.
Auto coverage uses split limits (e.g., 20/40/10) or a combined single limit. Business auto symbols matter: symbol 1 = any auto, 7 = specifically scheduled autos, 8 = hired autos, 9 = nonowned autos. Personal auto adds medical payments (fault-free, small limits), uninsured/underinsured motorists, and in no-fault states, PIP.
Homeowners Coverage E (personal liability) and Coverage F (medical payments to others - no fault, no deductible) are frequent exam targets.
Traps and a worked example
Traps: assuming the general aggregate caps auto or workers comp liability; forgetting employer's liability (Part Two) exists alongside workers compensation; and confusing “insured contract” exceptions with the blanket contractual exclusion.
Worked example: split limits of 20/40/10, one accident, two claimants with $30,000 and $25,000 in bodily injury. Each person gets $20,000 (per-person cap) = $40,000, and the per-accident limit is exhausted, so nothing further is paid on bodily injury. Property damage has its own $10,000 maximum.