Chapter 5 – Property Insured

Property Insured –

1) Personal property insurance insure private non business property.

2) Commercial property insurance insures commercial property @ named location.

Types of Coverage –

1) Named Perils: covers loss listed on the policy

2) Broad Form: Insurers against all direct physical losses except exclusions

Insure Direct Damage Only –

1) Insured property = damaged by peril

2) Indirect loss: result of direct loss

Covered Properties – Defined property & locations listed on the policy

Exclusions –

Perils excluded: potential for catastrophic loss; commercially uninsurable, naturally

occurring/cumulative damage; uncommon losses

Property excluded: > normal loss potential, expensive to insure, or specialized form exists.

Deductible Clause –

Deductible – Cost required to pay per loss, this reduces the amount of small losses and keeps insurance
affordable as the deductible may be more then the cost to replace the item. The higher the deductible
the cheaper the premium will be.

Standard Mortgage Clause – This is a side agreement between the insurance company and the
mortaggee(lender), this clause does the following things:

1) Guarantees Payment – Mortgagee to receive payment when insured = denied coverage if

breach of conditions
2) Requires Notice – Insurers cannot reduce coverage or terminate the policy without first
notifying the mortgagee. Insured cannot request to terminate policy without mortgagee’s
consent.

Conditions/Warranties –

1) Warranty
a. A warranty is a promise that something is true/remains true
b. Requires compliance
c. Breached = policy void
2) Conditions
a. A condition is a requirement to do/not do something
b. Statutory: legally required by everyone
c. Policy: stated on the policy & created by insurers
Claim Payment Rules –

1) Pair & Set/Parts Rule

a. The insurance company will only pay for the item that is loss not the full set. One earring
not both
2) Indemnity Agreement
a. Actual Cash Value: replacement cost minus depreciation (depends on several factors)
b. Interest of insured: insurable interest. (how much of that property do you actually own,
ex. How much does the bank own of the house, versus how much you own.)
c. Limit of the Insurance
i. Whichever one of these three items is the smallest amount of money due, that
is what the insurer will indemnify you for.

Alternative Basis of Settlement – Different type of policies you can pick.

Replacement Cost (RC) = cost to repair/replace something similar (without depreciation)

1) Replacement cost on Buildings

a. Done with due diligence & dispatch
b. Repair w/ materials of like kind/quality @ same/nearby location
c. ACV, then full RC after replacement
2) Replacement cost on actual personal property
a. Used for original purpose @ time of loss (ex. If you were using your laptop as a
doorstop, the insurer would not give you the replacement cost as it was being used
incorrectly.)
b. Replaced promptly
3) Valued Policies
a. Limits established via appraisal. Items are appraised prior to policy going into affect,
you’d get the replacement value of the item based off the appraisal.
Chapter 6 – Personal Property Insurance (Habitational Forms):

Purpose –

1) Single family dwelling (occupied all year by owners)

2) Under construction (will be occupied by owners).

Characteristics – All homeowner forms share two characteristics, they must have clear language and
standard format.

Standard format include:

1) Property Coverages
2) Liability coverage

Key Terms –

1) Persons insured
a. Named insured (anyone named on the policy)
b. Dependents (any of the following while living in the same household; husband or wife,
or common-law spouse [living together at least three years or have been living together
for one year and have a child together], Relatives of either that are living with the
named insured, anyone under 21 years of age that is in the care of the insured. Any
students that are being supported by the name insured, while temporarily away for
school.
2) Dwelling – Private residence
3) Premises – The land within the lot lines, located at the address wrote on the policy.

Losses Insured –

Section 1: Property Coverages

A) Coverage A – Dwelling Building

B) Coverage B – Detached Private Structures
C) Coverage C – Personal Property
D) Coverage D – Additional Living Expenses

Section 2: Liability Coverages

E) Coverage E – Personal Liability

F) Coverage F – Voluntary Medical Payments (no deductible)
G) Coverage G – Voluntary Payment for Property Damage (no deductible)
H) Coverage H – Voluntary Compensation for Residence Employees (no deductible)
Extensions of Coverage – Comes for free with all homeowners’ forms.

1) Moving to another home in Canada – Will cover the new place and your property in transit for
30 days.
2) Debris Removal – Gives you an additional 5% of the coverage A value to remove debris after a
loss.
3) Property Removal – Expands removal clause from 7 days to 30 days. (Insures property that was
removed from the site of the loss to protect it, increases it from 7 days to 30 days).
4) Credit/Debit Card, Forgery, Counterfeit Money – Up to 1000$
5) Inflation Protect – Limits auto adjusted by inflation
6) Tear Out – Repair walls, etc. tore out to get to a broken water pipe behind it
a. Exclusions: swimming pools & public water main
7) Change in Temperature – Indirect damage to personal property inside dwelling if cause of loss
was caused by an insured peril.
8) Freezer Food – Spoilage due to power failure/freezer breakdown up to 2000$, A freezer ruined
by spoiled food will be replaced. (no deductible).
9) Lock Replacement – Up to 500$ if your keys have been stolen, and this was reported to the
police.
10) Fire Department Charges – Up to 1000$ if a fire department from another city sends you a bill.
11) Arson Conviction Reward – Will pay anyone up to 1000$ for information leading to an arson
conviction.

Basis of Claim Payment – What the insurer will pay you for Property Damage and Personal Property
minus deductible

1) Dwelling & Detached Private Structures (RC/ACV)

a. Repair w/ similar materials, same location & occupancy
b. Guaranteed Replacement Cost covers full cost to repair even if cost is greater then the
limit of insurance (optional insurance to purchase).
c. Excludes by-law costs
2) Personal Property (RC/ACV but media & accounting records have a special basis of settlement)
a. ACV only for:
i. Fine Art, Antiques, Memorabilia
ii. Property not well maintained
iii. Property no longer used for original purpose
iv. Property not replaced within 180 days
Section 1 – Property Coverages

A) Coverage A – Dwelling Buildings (Coverage)

a. Dwelling + Attached Structures – Main house, garage, etc…
b. Permanently Attached Outdoor Equipment – Swings, tree houses, sprinklers, etc…
c. Fixtures Temporarily Removed – While at repair or seasonal storage, up to 10% of
dwelling limit.
d. Materials & Supplies on Premises – In construction or repairs
e. Outdoor swimming pool + attached equipment – In/above ground ex. Hot tubs
f. Outdoor Plants – 5% of dwelling limit up to 500$ a plant. Covers fire, lightning,
explosion, impact, riot, vandalism (excludes windstorm and hail).
B) Coverage B – Detached Private Structures. (10% of Coverage A).
C) Coverage C – Personal Property (On premises + off premises + student’s +60-90% of Coverage
A).
a. On Premises Coverage (Usual property, the stuff that is normally found in homes) –
Personal Property, Property of others in the insured’s custody, excludes property of
roomers and boarders.
b. Off Premises Coverage – Global coverage if temporarily off premises.
c. Property of Students – If living away from home for school
d. Excluses – Motorized vehicles + equipment attached to vehicle, aircrafts + equipment,
Campers, trailers + equipment.

Property Damaged by Any Insured Peril – Restricted payments

- Business property – up to 2000$

- Student’s property – up to 2500$
- Garden tractor & accessories – Up to 5000$
- Watercraft & Accessories – 1000$
- Money or Bullion – 200$
- Securities – 2000$
- Computer software – 2500$
- Spare car Parts – 1000$

Property Damaged by Any Insured Peril – Special Limits of insurance (theft & all perils)

- Property Stolen or Lost – Restricted payments

- Jewellery, Watches, Furs – 2000$
- Card Collections – 1000$
- Manuscripts & Stamps – 1000$
- Bicycles & Equipment – 500$
- Coins/Coin Collections – 200$

D) Coverage D – Additional Living Expenses – Additional Living expenses & Lost rental income
a. Additional Living Expenses – Expenses needed to maintain normal standards of living
due to relocation
 b. Fair Rental Value – Lost Rental income, pays 2 weeks when denied by civil order due to
danger caused by insured peril from outside the premises.

Homeowners Form – Basic Form (Type of named perils policy)

1) Fire or Lightning – Lightning damage to electrical device, plus fire damage

2) Explosion – Domestic boilers (excludes water hammer, explosion created by water pressure built
up in blocked pipes.)
3) Smoke – Malfunctioning furnace/cooking appliance
4) Windstorm or Hail – Interior covered if hole created by same occurrence (Excludes: damage to
antennas & accumulation of snow/flood/waves)
5) Impact by vehicle – Excludes damage to pets or by insured/employee operating vehicle
6) Falling Object – Damage to structures
7) Theft & Damage During Theft – Excludes: Pets, scams, under construction, vacant, portions not
occupied by insured
8) Riot
9) Vandalism or Malicious Acts – Excludes: Damage by insured or during theft/construction/vacany
10) Water Damage by Sudden and Accidental Escape of Water & Water Entering Through Opening
Created by Insured Peril – Excludes: Vacant buildings, Sewer back-up, Continuous seepage of
water, Flooding, Damage to systems from which water escaped, by freezing inside dwelling
when insured is away more then 4 days during heating season.
11) Glass Breakage – Breakage of building glass by accident or earth movement, excludes course of
construction and vacant buildings
12) Transportation – Personal property + fixtures
13) Electricity – Power surges/fluctuations

Exclusions:

- Building for Business Use – No permission from insurance company

- Illegal Property – Stolen, smuggled, not registered
- Dwelling Vacant for more then 30 days – Occupants left with no intent to return
- Intentional Act – By Insured or their agent
- Property on Display – Risky = no coverage
- Application of Heat – Example: clothes damaged in dryer, resultant damaged covered.
- Release of Fuel Oil – Spill from an oil furnace.
Homeowners Broad & Comprehensive Form

1) Homeowners Broad Form: Named perils for property & buildings for all risk
2) Homeowners Comprehensive Form: Broad Form + Property for ALL RISK

Exclusions to Comprehensive Form:

a) Water Damage
b) Snow/land-slides or “earth movements”
c) Wear and tear/mechanical breakdown/defect
d) Settling/expansion/etc. of building
e) Sporting equipment during use
f) Property being worked on for work
g) Caused by birds or vermin

Advantages of Comprehensive Form:

a) Insures all losses not excluded

a. Roof collapse from snow load
b. Smoke damage from fireplace
c. Damage to dwelling from impact by vehicle driven by “insured”
d. Jewellery that falls down a drain

Forms & Endorsements

Underwriting Homeowners Forms – Endorsements

You can add endorsements to provide coverage for additional items in the event of a loss.
Other Habitation Forms: Condo

- Condo Owners Insurance

o Condo = unit owned separately but together
o Strata(Condominium Corporation): owns and insures original value of building and
common elements.
 Common elements: shared with other unit owners.
- Unit Owner Policy (What you would purchase if you own a condo)
o Covers personal property + additional living expenses
 Loss Assessment: 5000$ or 100-250% of personal property
 Unit Additional Protection: Covers unit value when strata insurance can’t cover
 Unit Improvements 1000$ RC for premises upgrades
 Basis of Settlement: RC

Other Habitation Forms: Tenants Package & Rented Dwelling

- Tenants Package
o Property + Additional Living expenses
o Covers renter
- Rented Dwelling
o Rental properties (ACV)
o Usually not offered unless insurer also insurers client’s principle residence
o Excluses:
 Vandalism and Theft

Other Habitation Forms:

Mobile Home & Seasonal Dwellings

- Mobile Home Insurance

o Dwelling + permanent furniture, fixtures, equipment
o Emergency removal expenses: 5% of dwelling limit
- Seasonal Dwellings
o Added to primary policy as an additional location.
Chapter 6A – Additional Personal Property Coverages & Endorsements
Dwelling Under Construction

Owner Occupied – 1-2 family owner occupied dwelling

Policy Period – 1 year (purchase before foundation is done)

Limit – Limit > Completed value of the dwelling

Exclusions – Homeowners comprehensive form

- Theft of materials from construction

- Water escape, rupture, freezing water pipes
- Glass damage by vandalism.
Chapter 7 – Commercial Property Insurance

Commercial Property is any property owned or used by a business while on premise. There are three
types of commercial property:

- Building
- Stock
- Equipment

Commercial property does not have coverage when off premise, like residential insurance does.

There are two property forms you can get for commercial coverage:

- Named Perils: covers only perils listed (FSWILLER)

o Fire
o Smoke Damage (sudden & faulty operation of a stationary furnace)
o Windstorm & Hail
o Impact by vehicle
o Lightning + damage to electrical devices
o Leakage from fire protective devices
o Explosion: natural, coal, manufactured gas & boilers + pressure vessels under less then
15 psi of pressure
o Riot or malicious acts
- Broad Form: Insures all risks not excluded
o Vehicle impact caused by insured or employees
o Theft or attempted theft + property damage by theft
o Water damage due to freezing or ruptured pipes
o Collapse of building
o All sources of smoke damage

Premiums –

Premiums charged are related to coverage: total rate/$100 = fire rate + loading (additional perils)

Fire Rate: Covers fire, lightning and explosion

- Factors that affect fire rate:

o Building Construction
o Claims History
o Protection
o Occupancy
o Location
- Premium
o Total Rate (Fire rate + loading) x Building Value = Premium
Common Clauses that apply to Commercial Policies –

Description of Property Insured

- Building (The building on declaration page, these points below are also classified as part of the
building).
o Fixed Structures
o Permanent Fixtures
o Additions and extensions
o Material and Equipment on Premise
o Decorative Indoor plants
- Stock (These points are what classifies as stock for a business policy).
o Merchandise usual to the business
o Packaging & advertising materials
o Similar property of others (in care of the insured)
- Equipment
o Contents usual to the business + similar property of others + tenant improvements

Co-Insurance Clause –

The co-insurance clause ensures that the insured purchases a minimum amount of insurance, based on
a % of values. The co-insurance clause applies to each of the three types of property separately.

The co-insurance clause only applies to partial losses that are greater then the lesser of 2% of the total
amount of insurance or 5000$.

Co-insurance losses do not apply to TOTAL losses, or losses that are SMALL.

When there is a loss an adjuster will determine a few things:

- ACV of property
- Amount of loss & limit purchased
- Amount of settlement = penalized if didn’t meet co-insurance requirement.

The amount of settlement can be penalized if you don’t meet your co-insurance requirement, it would
be penalized as per this formula.

Settlement = Limit of insurance you did buy / Limit of Insurance you should have bought X The loss
amount.

Example:
The insured has a minimum coinsurance amount of 1M, and the insurer set the requirement to 80% the
insured must carry a minimum of 800,000$ of insurance. The insured only purchased 400,000$ of co-
insurance. You’ve suffered a 100,000$ loss. Calculate the penalty:

(400,000/800,000) x 100,000 = 50,000$

Subrogation Clause –

Subrogation Clause: Can sue responsible party to recover claims paid

- Will not subrogate fellow insured(s)

- If net amount recovered = insufficient to cover loss, then amount is divided between the insurer
and insured.
- Insured cannot release anyone of liability.

Reinstatement Clause –

Original amount of insurance is reinstated after loss is paid.

Debris Removal –

Use remainder of limit after rebuilt to pay for debris removal.

Property Protection Systems –

Discounts on the premium if you have alarms, sprinkler systems installed.

- Conditions: must notify insurer immediately of any known interruption/defect of protect system
& of any cancellation of monitoring/maintenance/police services
- Breached conditions:
o Reduced coverage
o Charge additional premium
o Cancel the policy

Other Commercial Property Forms

Property Away From Insured Premises:

- Covers if in transit & at temp. location (CA/US)

- In Transit: locked from start – end
- Temp location: covers property in care, custody, control of a bailee for hire:
o Bailee for hire: repair, service, storage, @ carrier’s depot

Glass Insurance:

- Covers accidental damage by anyone, earth movement, thieves

o Exclusions: fire (covered elsewhere), war, nuclear hazard

Valuable Papers & Records

- Valuable papers: documents, records, drawings, books, maps, etc.

o Must be stored in the described receptacle when not in use/closed.
Boiler & Machinery Policy (Equipment breakdown)

- Covers equipment (mechanical) breakdown

- Damage to buildings from explosion of boilers & pressure vessels >15 PSI. Electrical or
mechanical breakdowns.
- Insurer inspects objects before and during policy period.

Contractor’s Insurance:

There are three types of contractor’s insurance:

1) Builders Risk – Broad Form

1. Builders Risk – Broad Form (This is bought by building owners or general
contractors to insure the building well under general construction.)
- Coverage:
o Materials owned by insured and forming part of the finished project
o Landscaping and temp buildings (Scaffolding)
- Exclusions:
o Tools and equipment
o Cost of making good faulty materials
o Workmanship
o Design
- Limit:
o Complete value of Construction
- Policy period:
o Ends when occupied or unattended for 30 consecutive days.

Contractor’s Equipment Floater: Covers moveable equipment owned by insured. (backhoes, loaders,
etc..)

Installation Floater for Specialized Contractors(glass installers, plumbers, electricians, etc…):

Covers Property:

- In transit to a job site

- At job site awaiting installation
- During installation until accepted or insured’s interest ceases
- Exclusion: tools and equipment or cost of making good improper.
Crime Insurance – 3 Types (Commercial policies only have coverage for riot and vandalism that’s why
you have to buy separate crime policies):

1) Burglary (In and Out no body saw):

a. Mercantile Stock Burglary
i. Covers theft from a closed premise, with visible signs of forced entry.
b. Safe Burglary
i. Covers theft from a safe, if force was used to enter the safe.
2) Robbery (Requires a person):
a. Covers money, securities, valuable property when:
i. Taken by actual/threatened force to custodian
ii. Custodian witnessed property being taken
iii. Taken from a custodian killed/rendered unconscious
3) Theft
a. Taking without the owners’ consent (broadest)
b. Money and securities policy cover:
i. Actual destruction
ii. Disappearance
iii. Wrongful abstraction

Business Interruption Insurance: Restores lost income caused by insured perils up to the level the
business would have earned without the loss. (Perils insured against at the same as your commercial
property insurance):

Coverage:

- Starts on the date of loss up to 12 months

- Pays lost net profits + continuing expenses
- Covers necessary expenses if proven to reduce amount of loss

Types:

- Earnings form
o Will pay you until your property has been repaired or up to 12 months.
- Profits Form
o Will pay you until your profits have been restored or up to 12 months.
- Extra Expenses Insurance
o Pays any extra expenses needed to maintain normal business. (overtime pay, renting an
alternate premise so you can continue your business from there or even renting
equipment).
Chapter 7A – Additional Commercial Property Coverages & Endorsements

Property Coverages & Endorsements

Accounts Receivable – All Risk coverage

Electronic Data Processing (EDP) – All Risk coverage for hardware, software, and extra expenses

Office Equipment Floater – All risk coverage for office equipment, accounts receivables, valuable papers
and extra expenses.

Jeweller’s & Furrier’s Blocks – Standard policies have limits on these items.

Surety – 1 entity guaranteeing another will perform an obligation

Surety Bonds

- 3-party contract
- Doesn’t anticipate losses
- Premiums = not based on estimated future losses
- Insured = reimburse surety (can be subrogated against)
- Written binding
- Infinite length & non-cancellable
- Can’t increase limit

Characteristics

- 3-party contract (principal, oblige[person the principal is liable to], surety[pays money to oblige
if principal fails])
- No Losses expected
- Principal = liable for surety
- Bond premium
- Indeterminate length and non-cancellable
- Written contract only and must have the sureties seal of approval.

Qualifying Criteria for Principals

- Character and Industry reputation, financial capacity, knowledge, labour pool and experience

Construction Bonds:

Bid Bond – Guarantees contractor will enter contract @ bid price & do the job (Penalty to cancel a bid
bond, is normally 10% of the contract price). {Surety Consent, promises to issue further bonding if the
contractor wins the bid ex. If they win we will issue a performance bond, etc…}

Performance Bond – Guarantees performance of work as per contract

Labour & Materials Bond – Guarantees suppliers are paid for work.
Miscellaneous Bonds:
Fiduciary Bonds – Guarantees the faithful performance of their duties

- Estate administrator bond

- Guardianship bond
- Trustee Bond

Customs & Excise Bond

- Guarantees payment of taxes/import duties

License & Permit Bonds

- Licensed businesses & may need to follow regulations

Farm Insurance:

Dwelling/Personal Property Coverage/Endorsements – Same as habitational Forms

Farm Liability is a mixture of Business and Personal Liability

Farm Buildings and Contents Coverage –

- Ranges from Fire insurance all the way to all risk insurance
- Farm Buildings: Barn, workshops, storage buildings
- Commercial RC coverage available
- Rebuilding clause – Deferred payments:
o 50% upfront + 50% if rebuilt within 9 months, 200ft, and same purpose.
- Valuation Methods:
o Appraisal, contractor estimates, online calculators
- Calculating rebuild value:
o Gather property details, research construction costs, use estimation tools/services,
adjust for additional factors, and review and update regularly.

Farm Contents –

- Blank coverage + scheduled coverage (high-value items)

Farm Machinery/Equipment –

All tools usual to farm

Custom Farming –

Using machinery away from your farm for compensation (exclusions applies).

Farm Livestock –

- Insured for Named perils

- Coinsurance, theft and per animal limit may apply.
Farm Produce –

- Stuff listed on Declaration page + feed, fertilizers, pesticides, milk, eggs and agricultural
products.

Misc. Coverage – Farm earnings, game/exotic livestock, embryo/semen

Underwriting Farm – Must have a written application with diagram (distance between buildings).

Cyber Security Risks:

Cyber Risk – Risk of loss/disruption due to IT systems failure

3 types of cyber risk – Deliberate(someone targeted an organization), unintentional(employee losing a

laptop with sensitive information), operational (don’t install required security updates in time).

Loss Types – Direct (ransom payments, data recovery, etc…) and Indirect (extra expenses, professional
fees, competitive advantage if IP is leaked, etc…)

Coverage Types – First party (non-liability, covers the organization that purchased the coverage itself),
Third Party (Liability, covers losses that may arise from the cyber security breach to others outside of
your organization)

Cyber Insurance – Covers technical resources(lawyers, IT professionals needed, etc…), business

interruption and risk management tools

Intellectual property – Covers legal fees for IP infringement

- Types:
o Copyright, trademark, trade secrets and patents

Trade Credit – Guarantees suppliers get paid if buyers default.

- Acts like a surety bond

- Creditworthiness of buyer is key
- No interest charged during payment term
Insured Businesses and Subscription Policies

Types of Insured Businesses

- Sole Proprietor
- Partnerships (general and limited)
- Corporation

Subscription Policies – Used when the risk is to big for one insurer to take on the risk alone.

- Used when reinsurance treaty doesn’t cover, large limits exceed one insurers appetite, risk
sharing is needed.
- Characteristics:
o Shared premiums/losses and each insurer negotiates and pays separately
- Lead insurer: has largest stake or goes first, handles servicing and collects premiums
- All insurers listed on the policy.

Chapter 8 – Basics of Legal Liability

Legal System –

Criminal Law – Addresses wrongs against society by punishing the wrongdoer

Civil Law – Addresses disputes between parties by compensating the wronged party

Common Law – Based on precedence

Statute Law – Written law created by legislation

Civil Law (Insurable) – Broken down into two branches. Contract Law and Tort Law.

Contract Law – Enforces contract and remedies breach of contract by enforcing performance.

Tort Law – Tort: private wrong other than breach of contract.

- Examples;
o Negligence, trespass, defamation, false arrest, invasion of privacy.
 If someone is suing you for tort, they must be able to prove the following:
 Owed them a legal duty, legal duty was breached, damages resulted
directly from the breach.

Types of Tort:

- Unintentional Tort
o Caused by carelessness (accident, this type of tort is insurable.)
- Intentional Tort (not an accident, you did this on purpose.)
o Not insured
- Strict Liability: Person is automatically responsible if:
o Doing hazardous activity
o Allowing the spread of intentional fire
 o Reasonable act in unreasonable setting

Tortfeasor – Someone who commits a wrong against an innocent party

- Joint tortfeasor = 2+ people acting together to cause damage.

Onus of Proof – Falls on the defendant

Negligence – Carelessness or failure to use the care of a reasonable and prudent person given the
circumstances.

- Plaintiff must prove duty owed and duty breached by negligence.

o Foreseeability: defendant not negligent if outcome = not reasonably foreseeable.

Legal Precedents – Ownership of Property

- Different duties owed to different types of people entering your premises.

o Trespasser: only duty you owe a trespasser is to not set traps or intentional harm
o Licensee (entered your premise for there own purpose, but with your permission): Let
them know about any known dangers they may encounter.
o Invitee: Protect them against dangers known or might reasonably discover
o Children: must be protected and safe from all dangers
- Occupiers liability act (BC,AB,ON &NS) combines licensee and invitee (“visitor”): makes sure
they’re reasonably safe for the purpose of their visit.
- Persons Outside the Premises: Related to use/maintenance of the building (makes sure nothing
leaks out).
- Liability of Landlord: Liable when incorrectly warrants fitness for a particular use or conceal
adverse condition.
o Renting furnished premises
o Landlord agrees to maintain premises but fails after reasonable notice given
o Common areas
- Liability of Tenant to Landlord
o Tort law: Liable for damages caused by negligence
o Contract Law: for liability assumed by tenant in the lease agreement.
- Liability for Children – Responsible unless you can prove lack of understanding of consequences.
o Not liable unless:
 Fail to supervise the child
 Damage caused by dangerous things given to child by parent
 Child acting on authority of parents
 Child working at parent’s business.
- Liability of Bailee for Hire
o Tort law requires ordinary care
o Liable when duty breached by negligence + contractual liability
- Employer’s Liability for Employees – Employers are vicariously liable for employee torts while in
course of their duties:
o Note liable for employees
 Delegate their duties without employers consent
  Unauthorized time away for own business
 Unauthorized use of employer’s property.
- Employer’s liability for employee injuries: legal duty established in Workers Compensation Act
(WCA)
o WCA = no fault basis
o If no WCA = can manually enroll/buy employers liability rider.

Liability for Independent Contractors

- Generally not liable for contractor negligence except:

o Work is inherently dangerous
o Insured supplies defective material or equipment
o Insured controls the work
o Work must be reasonable and insured must have been careful in selecting contractor.

Liability for Animals

- Domestic animals: owners = liable on first bite

- Wild animals = strictly liable for any damage

Joint Liability

- Multiple parties act negligently together

o When liability is unequal = law holds each party fully responsible and defendant sorts it
out later

Premises Liability

- Occupiers legal duty: keep premises reasonably safe for invitees, licenses, trespassers
- Basis for claims: occupier knew/should have known of a hazard, failed to repair or warn of
danger, injured party must prove negligence.

Insuring Agreement

Insurers Bodily Injury and Property Damage:

- Bodily injury is defined as either:

o Inquiry: external source
o Sickness: manifest internally
o Death resulting direct from above
- Property damage is defined as: physical injury to tangible property

Payment only when legally liable: This will be determined by the courts.

3rd party coverage only – payment only to parties not named on party.

Liability insurance pays only for compensatory damages. That means:

- There is no coverage for normative or punitive damages. (this are awarded when there is liability
but no actual damage.)
- This liability insurance pays when:
 o compensatory damage: compensates the wrong party for inquiry
o Special damage: compensate the plaintiff for out-of-pocket expenses
o General damages: unquantifiable damages
o Nominal damages: small monetary award to establish right and wrong
o Punitive damages: meant to punish the defendant.

Coverage: Occurrence Basis – The policy that was in force at the time of the loss is the policy that pays.

- An accident is sudden and unexpected

- Continuous exposure occurs over a long period of time, exposure to tainted baby powder.

Limits of liability apply per occurrence – for example if you have 5M worth of liability insurance that
protects you per occurrence.

Aggregate limit – Max amount of occurrence payments allowed during a single policy period.

Split Limits – A limit for personal injury, injury of all people and property. This is the max amount one of
these policies would pay out per occurrence per policy period.

Duties in the event of an Occurrence or Claim (PALAC):

- Prompt Notice – Let insurer know of any occurrence (even if the claim hasn’t been filed yet,
time, place, circumstance, and contact information for anyone there).
- Assist – Investigation, settlement or defense.
- Legal papers – Forwarded to insurer within the time limit
- Authorize - Let insurer obtain information
- Can’t make voluntary payment – You are only allowed to offer first aid.

On top of the damages already established in a liability policy the insurer will also protect you for
supplementary payments:

Supplementary Payments:

- Expenses – Lost wages of insured from appearing in court

- Court Costs – Court may require insured to pay court costs
- Bond premiums – Appeal bonds.
- Interest – Payable interest on amounts up to the limits.

Supplementary payments are paid in addition to the policy limits.