A tort is a wrongful act, other than a crime or breach of contract, committed by one party against another.
Tort law is the branch of civil law that deals with civil wrongs other than breaches of contract. The central concern of tort law is determining responsibility for injury or damage.
Under tort law, an individual or organization can face a claim for legal liability on the basis any of the following: -
· Negligence
· Intentional torts
· Absolute torts
Types of Torts
| Negligence (Failure to act in a prudent manner) | Intentional Torts (Deliberate acts that cause harm) | Absolute Liability (Inherently dangerous activities) |
| Elements: Duty owed to another Breach of that duty Injury or damage Unbroken chain of events from breach of duty to injury or damage | Examples: Assault Libel Slander False arrest Invasion of privacy | Examples: Owning a wild animal Blasting operations |
Negligence
Negligence is failure to act in a manner that is reasonably prudent. Negligence occurs when a person or organization fails to exercise the appropriate degree of care under given circumstances.
A liability judgment based on negligence depends on the following four elements: -
· A duty owed to another. The first element of negligence is that a person or organization must have a duty to act (or not to act) that constitutes a responsibility to another party.
· A breach of that duty. In order for a person or an organization to be held negligent, a breach of the duty owed to another party must occur. A breach of duty is failure to exercise a reasonable degree of care expected in a particular situation.
· Injury or damage. The third element of negligence requires that the claimant must suffer definite injury or harm. No recovery can be made unless there is injury or harm.
· Unbroken chain of events between the breach of duty and the injury or damage. A finding of negligence also requires that the breach of duty initiate an unbroken chain of events leading to the injury. The breach of the duty must be the proximate cause of the injury.
A tortfeasor is a person, a business, or another party who has committed a tort.
Vicarious liability is legal responsibility that occurs when one party is held liable for the actions of another party. For example, parents might be found vicariously liable for the actions of their minor children.
Intentional Torts
An intentional tort is a deliberate act (other than a breach of contract) that causes harm to another person. Intentional torts include: -
· Assault – the intentional threat of bodily harm
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· Libel – a written or printed untrue statement that damages a person’s reputation
· Slander – an oral untrue statement that damages a person’s reputation
· False arrest – an unlawful physical restraint of another’s freedom
· Invasion of privacy – an encroachment on another person’s right to be left alone
Absolute Liability
Absolute liability (sometimes called strict liability) is legal liability that arises from inherently dangerous activities or dangerously defective products that result in injury or harm to another, regardless of how much care was used in the activity. Absolute liability does not require proof of negligence. (“Strict liability” is also used to describe the liability imposed by certain statutes, such as workers compensation laws).
For example, Blasting operations present an exposure to liability for business organizations.
Contracts
A contract is a legally enforceable agreement between two or more parties. Contract law enables an injured party to seek recovery because another party has breached a duty voluntarily accepted in a contract. In such a case, it is the specific contract, rather than law in general, that the court interprets.
Two areas of contract law important to insurance are liability assumed under a contract and breach of warranty.
Liability Assumed Under Contract
Parties to a contract sometimes find it convenient for one party to assume the financial consequences of certain types of liability faced by the other. The party assuming liability might be closer to the scene, exercise more control over operations, or have the ability to respond to claims more efficiently.
A hold harmless agreement is a contractual provision that obligates one party to assume the legal liability of another party. This provision requires that one party to “hold harmless and indemnify” the other party against liability arising from the activity (or product) that is specified in the contract.
Breach of Warranty
Warranties are promises, either written or implied, such as a promise by a seller to a buyer that a product is fit for a particular purpose.
The law of contracts also governs claims arising from breach of warranty. Contracts for sales of goods include warranties, or promises made by the seller. The law also implies certain warranties. The buyer in such contracts does not have to prove negligence on the part of the seller. The fact that the product does not work shows that the contract was not fulfilled.
Statutes
Statutory liability is legal liability imposed by a specific statute or law. Statutory liability exists because of specific statues. Although common law may cover a particular situation, statutory law may extend, restrict, or clarify the rights of injured parties in that situation or similar ones. One reason for such legislation is the attempt to ensure adequate compensation for injuries without lengthy disputes over who is at fault. Prominent examples of this kind of statutory liability involve no-fault auto laws and workers compensation laws.
No-Fault Auto Laws
In an effort to reduce the number of lawsuits resulting from auto accidents, some states have enacted “no-fault” laws. These laws recognize the inevitability of auto accidents and restrict or eliminate the right to sue the other party in an accident, except serious cases defined by the law. Victims with less serious injuries collect their out-of-pocket expenses from their own insurance companies without the need for expensive legal proceedings.
Workers Compensation Laws
Such a statute eliminates an employee’s right to sue the employer for most work-related injuries and also imposes on the employer automatic (strict) liability to pay specified benefits.
In place of the common law principle of negligence, workers compensation laws create a system in which injured employees receive benefits specified in these laws. As long as the injury is work-related, the employer pays the specified benefits regardless of who is at fault.
Liability Loss Exposures and Policy Provisions
