Casualty Insurance Principles and Coverages
Liability fundamentals
Casualty insurance responds to legal liability for injury to persons or damage to property of others. Negligence requires duty, breach, proximate cause, and damages. Defenses and doctrines matter: contributory negligence (harsh and limited), comparative negligence (reduces recovery by the plaintiff's percentage), assumption of risk, and res ipsa loquitur (the thing speaks for itself). Liability may be vicarious (employer for employee), contractual (hold-harmless), or absolute and statutory (dog bite, dram shop, workers compensation).
Policies cover legal liability, not moral obligation. Compensatory damages include special damages (medical bills, lost wages) and general damages (pain and suffering); punitive damages are often excluded or restricted. Liability policies pay on behalf of the insured, defend suits, and pay supplementary payments (defense costs, bail bonds, loss of earnings), typically in addition to the limit. Coverage triggers differ: occurrence (injury during the policy period) versus claims-made (claim made during the period, subject to a retroactive date and extended reporting options).
Limits include per person, per occurrence, and aggregate; defense costs may be inside or outside the limit depending on the form. Other concepts: additional insureds, primary and excess, self-insured retention, and the insured's duty to cooperate.
Traps: assuming defense costs always erode limits; confusing medical payments coverage (paid without regard to fault) with liability coverage; forgetting the retroactive date on claims-made forms.
Rule of thumb: a per-person limit caps all damages for one claimant; the per-occurrence limit caps the total for all claimants in one accident.
Worked example: A $100,000 per-person / $300,000 per-occurrence policy. Two claimants have damages of $150,000 and $120,000. The first receives $100,000, the second receives $100,000, for a total of $200,000 within the occurrence limit.