Casualty Insurance Basics and Policy Provisions
Liability fundamentals
Negligence requires duty, breach of duty, proximate cause, and damages. Compensatory damages are special (medical bills, lost wages) or general (pain and suffering); punitive damages punish. Vicarious liability holds one party responsible for another's acts, typically an employer for an employee. Strict or absolute liability applies to inherently dangerous activities and certain products, imposing responsibility without proving fault.
Policy mechanics
Occurrence policies respond to injury or damage that takes place during the policy period, regardless of when the claim is filed. Claims-made policies respond to claims first made during the period, limited by a retroactive date, and can be extended by an extended reporting period. Limits include per person, per occurrence, general aggregate, and products-completed operations aggregate. Whether defense costs are inside or outside the limit depends on the form, so check the supplementary payments provision.
Duties and defenses
Insureds must give prompt notice and cooperate. Comparative negligence reduces a plaintiff's recovery by the plaintiff's share of fault; contributory negligence can bar recovery entirely in jurisdictions that still use it. Assumption of risk and the statute of limitations are common defenses.
Traps
- Intentional acts are excluded even when the insured did not intend the specific injury (expected or intended injury).
- Auto liability, employer's liability, and professional liability are generally excluded from general liability forms.
Worked example
A visitor slips on an icy walk. Medical payments coverage pays the visitor's medical bills up to the sublimit regardless of fault. Liability coverage pays only if the insured is legally liable, and it also funds the defense.