This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Finance Final Study Guide Chapter 15: Personal Property and Liability Risks Property losses are limited to the value of the property damaged, destroyed, or stolen; and indirect costs Property losses, in general, are easily settled and indemnification is rapid Liability losses are unbounded, you can lose assets and income, and incur legal defense costs Liability may be difficult to determine and liability awards are difficult to gauge. Liability claims are notorious for having a long tail (Insurance of liability risks where notification and payment of claims are intrinsically delayed) Chapter 19: The Liability Risk The basis of liability (the state of being responsible for something) risk is torts. There are three types of torts as listed below o Intentional torts describes a civil wrong resulting from an intentional act or omission on the part of the defendant (bodily damage, personal injury, and property damage) Examples: Assault, battery, trespassing o Absolute liability situations Where an individual may be held liable for a breach of the law without the requirement that criminal intent be proven by the prosecution Liability is imposed regardless of negligence or fault o Negligence The failure to use the degree of care needed to protect others from harm. A four part test is used to determine negligence: Legal duty of care o Example: stop at a stop sign Failure to meet the standard o Example: failure to stop at the stop sign Did injury occur as a result o Example: you hit a car because you failed to stop at the stop sign properly Was there proximate cause o There must be an unbroken chain of events between the negligent act and the injury or harm that occurs Damages awarded may be: Special damages (for what can be itemized) General damages (for what cant be itemized) Punitive damages (to punish/deter other acts) Defenses Against Negligence Contributory negligence: If the injured persons conduct falls below the standard of care required for their protection, and such conduct contributed to the injury, the injured person can be barred from collecting damages o Example: failure to signal when merging Comparative negligence: if both the plaintiff and defendant contribute to the plaintiffs injury, the financial burden of the injury is shared by both parties according to the degree of fault o Pure: can be paid no matter what (certain percentage) o 51% rule: if you are 51% or more liable you wont be paid o 50% rule: if you are 50% or more liable you wont be paid o Example: One car driving too fast in the fog hits another car that failed to have their lights on Assumption of the risk: A person who understands and recognizes the danger inherent in a particular activity cant recover damages in the event of an injury o Example: teaching someone with severe vision impairment to drive, and they crash and injure you No defense situations Absolute (strict) Liability: Liability that does not depend on actual...
View Full Document
This note was uploaded on 01/10/2012 for the course FIN 350 taught by Professor Mcnamara during the Spring '11 term at Washington State University .
- Spring '11