CPCU 552 Flashcards – Module 1

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[h] CPCU 552 – Module 1

[q] Legal liability

[a] The legally enforceable obligation of a person or an organization to pay damages to another.

[q] Civil law

[a] A classification of law that protects rights and provides remedies for breaches of duties.

[q] Criminal law

[a] A classification of law that imposes penalties for wrongs against society.

[q] Tort

[a] A wrongful act other than a breach of contract or crime.

[q] Broad categories of torts

[a] Three broad categories:


Intentional torts.

Strict liability torts.

[q] Negligence

[a] A civil wrong that is unintentional.

[q] Elements of negligence

[a] Elements:

The defendant owed a legal duty to the plaintiff.

The defendant breached the duty.

The negligent act was the proximate cause.

The plaintiff suffered damage or injury.

[q] Intentional tort

[a] A tort committed by a person who foresees the act will cause harm.

[q] Strict liability

[a] Liability imposed even though defendant acted neither negligently nor with intent to cause harm.  Also known as absolute liability.

[q] Breach of contract

[a] The failure to fulfill a contractual promise.

[q] Hold-harmless agreement

[a] A contractual provision that obligates one party to assume the legal liability of another party.

[q] Statute

[a] A written law passed by a legislative body, at either the federal or state level.

[q] Categories of commercial liability exposures

[a] Categories:

Premises and operations liability.

Products and completed operations liability.

Auto liability.

Workers compensation and employers liability.

Professional liability, management liability.

Marine liability, aircraft liability.

Cyber liability.

[q] Premises and operations liability

[a] Liability that arises from bodily injury or property damage caused by:

An accident occurring on an organization’s owned, leased, or rented premises.

An accident arising from an organization’s ongoing operations away from the premises.

Certain mobile equipment.

[q] Products liability

[a] Liability that arises out of the manufacture, distribution, or sale of an unsafe, dangerous, or defective product.

[q] Elements needed to provide strict liability

[a] Plaintiff must prove:

The product was defective when it left the manufacturer’s or supplier’s control.

The defective condition made the product unreasonably dangerous.

The product was proximate cause of injury.

[q] Completed operations liability

[a] Liability of an entity arising out of their completed work.

[q] Reasons for risk control programs

[a] Reasons:

Liability exposures that arise from products and activities can cause serious harm.

Exposures can result in significant financial consequences.

Poor safety records and serious accidents can cause reputational damage.

[q] Loss prevention

[a] A risk control technique that reduces the frequency of a particular loss.

[q] Loss reduction

[a] A risk control technique that reduces the severity of a loss.

[q] Risk avoidance

[a] A risk control technique that involves ceasing or never undertaking an activity, thus eliminating loss potential.

[q] Key issue affecting the valuation of a liability claim

[a] Key issue is the amount of monetary compensation that will reason­ably indemnify the party who incurred the loss.