Legal Liability and Negligence
Insurance is purchased to protect against losses, and a major source of loss, especially in this litigious society, is legal liability. Legal liability is the liability of a party imposed by a court for its actions or inactions, and for which the courts will award pecuniary damages to redress the injury. A legal wrong is either a violation of a person's rights or the failure to perform a legal duty for a party.
Legal liability arises from 3 general classes of legal wrongs: crime, tort, and breach of contract. Crime is a wrong in which a person intentionally inflicts injury, or takes something from another, such as murder, robbery, rape, and theft. Torts are legal or civil wrongs committed against people or organizations, causing them a loss. Intentional torts are willful acts or the willful failure to act when required to do so that causes injury to someone else. Thus, crime is a specific type of intentional tort. Other types of intentional torts include slander and libel, patent infringement, and false imprisonment. Torts result either because the tortfeasor, who is the one who commits the tort, is either negligent in his duties that are imposed by law and not contract, causing someone else a loss, or causes a loss through his actions. For example, causing an auto accident, or failure to make a safe product are torts. Breach of contract is the lack of performance by a party to another to satisfy a contract that the parties agreed to.
Negligence is the failure to exercise the required amount of care to prevent injury to others. For example, if you cause an accident that injures someone or damages their vehicle because you were driving at an unsafe speed, then you could be sued for negligence.
For certain types of liabilities, the law may impose absolute liability (aka strict liability) on specific parties without regard to fault, and, therefore, obviates the need to prove fault in court. For instance, manufacturers are held strictly liable for defective products that they manufacture.
Sometimes, the law designates other parties as being responsible, whether they are or not. Imputed negligence results in vicarious liability, where the principal is responsible for the acts of his agents. For example, employers have vicarious liability for the actions of their employees. If an employee injures someone in the course of employment, then it doesn't matter whether the employer could have done anything to prevent it — the employer will be held liable regardless. Other instances of imputed negligence is through the effect of the family purpose doctrine that holds parents responsible for the negligent acts of their children, or the dram shop law, which holds the seller of alcoholic beverages liable for drunken patrons. If a patron drives after drinking at a tavern, and subsequently kills or injures someone with his vehicle, then the tavern owner can be held liable.
Sometimes, the act itself determines negligence. Under the doctrine of res ipsa loquitur, (Latin term for "the thing speaks for itself"), there are some actions so obviously negligent that the law presumes negligence, such as when a surgeon operates on the wrong side of the body. The defendant, in such cases, must prove that he wasn't negligent.
Requirements for Negligence
Most cases of negligence cannot be determined absolutely, for it depends on many factors. The main measure used to determine whether an act was negligent is to consider what a reasonably prudent person would do, given the age and knowledge of the tortfeasor, and other relevant factors.
Before a court will award damages, the presumed negligence must satisfy 4 requirements:
- there must be a legal duty to perform or to use reasonable care;
- there must have been a failure to perform that duty;
- the plaintiff must have suffered an injury or a loss;
- and the negligent act must have been the proximate cause of the injury. The proximate cause is a cause that directly caused the loss or suffering so that if the proximate cause didn't happen, then the harm would not have happened.
All 4 elements of negligence must be present before a court will award damages.
Defenses Against Negligence
There are various factors that can either prevent a plaintiff from collecting damages or that will reduce the amount awarded.
Contributory negligence is negligence that is caused by both plaintiff and defendant. If the plaintiff contributed to his injury, then, in some states, the plaintiff will be prevented from collecting any damages.
Comparative negligence allows the plaintiff to collect some damages, but it will be reduced by the amount by which the plaintiff contributed to his own injury. There are 3 major rules, which differ according to state law and according to the amount of contributory negligence, that determine the amount that the plaintiff can collect.
- The pure rule reduces the plaintiff's damages by the amount that he contributed to his own injury. Thus, if a plaintiff has been judged to be 30% at fault, then his reward will be reduced by 30%.
- The 49 percent rule requires that the defendant be less than 50% responsible to collect any damages, and any damages awarded will be reduced by the plaintiff's contribution. Under this rule, only 1 party can collect where both parties are suing each other.
- The 50 percent rule permits the plaintiff to collect damages only if his share of the negligence is not greater than 50%. In contrast to the 49 percent rule, both parties can collect 50% of their damages from each other if both are judged to be 50% at fault. However, if the degree of fault is anything but 50%, then only 1 party will be able to collect damages, just as under the 49 percent rule.
The last clear chance rule modifies comparative negligence by allowing the plaintiff to collect damages from the defendant, even if the plaintiff contributed to his injury, if the defendant had a last clear chance to prevent the injury. In other words, could the defendant have prevented the injury regardless of the plaintiff's negligence? If the answer is yes, then the plaintiff will still be able to collect regardless of comparative negligence.
Finally, there is the assumption of risk — one assumes risk by engaging in an activity that is inherently risky, and, therefore, should not be allowed to collect damages if an injury results by engaging in the activity. Thus, if one plays racquetball without wearing goggles, and her opponent hits the ball and injures her eye, she will be prevented from collecting damages from her opponent, because by playing racquetball without wearing goggles, she assumed the risk that she will suffer an eye injury or even lose an eye while playing.
There are 3 general types of damages awarded for negligence. Special damages are awarded for losses where the financial impact is quantifiable and can be itemized, such as medical expenses or loss of income. General damages are losses that cannot be known with certainty or cannot really be compensated with money, such as loss of consortium or pain and suffering. Punitive damages are assessed to deter the tortfeasor from committing the act again, which only makes sense for intentional torts.
Insurance can be purchased to protect against lawsuits that arise from strict liability and from negligence. However, all insurance contracts exclude intentional torts by the insured, because they are not insurable risks, since insuring such risks would be against public policy.
Liability insurance (a.k.a. third-party insurance) protects against losses arising from liability lawsuits. Liability insurance generally pays for the legal defense of the insured and any damages that are awarded by the court, up to the policy limit. Some liability insurance is usually included in certain types of insurance, such as auto insurance and homeowner's insurance. However, the amount of coverage provided by these types of insurance are usually low, so wealthier people generally supplement their coverage with personal umbrella insurance (a.k.a. excess liability insurance), which greatly increases the amount of coverage provided against losses from liability. However, umbrella insurance generally requires that the insurance applicant has basic coverage from auto insurance or homeowner's insurance, since umbrella insurance is considered the excess coverage.
A professional liability policy may also need to be purchased if the insured works in a profession that requires such coverage, such as doctors, attorneys, architects, and other professional occupations. Professional liability insurance covers the specific types of liability that may arise in these professions and usually has much higher policy limits, since liability in these professions can result in much higher damage awards.
Large companies may also purchase liability insurance for their directors and officers, which is often called D & O insurance, to protect them from lawsuits that may arise because of alleged mismanagement or other types of negligence.