Essentials of Loss Adjusting C110

Study 8 Liability Claims

Introduction to Legal Liability and Liability Claims

• civil law governs the conduct of members of society toward each other by imposing duties and obligations upon them
• liability insurance offers protection to the insured against the costs of a civil action
• insurers do not wait until a formal legal claim has been made they act when the occurrence is reported

The Common Law System and Liability Claims

Three categories are used to organize the study of how the law may impose

1.     negligence

2.     nuisance

3.     breach of contract

A tort is a civil wrong or wrongful act for which the law will provide a remedy in the form of an action for damages against the liable party. A person who commits a tort is a tortfeasor

Negligence has been defined as the failure to do something that a reasonable person would do (or do what a reasonable person would not do) under the same circumstances, or the failure to exercise the degree of care expected of a reasonably prudent person under the same circumstances

The negligent act can be intentional on the part of the wrongdoer, it can be a failure to act, or it can be an explicit act

Nuisance is a wrong arising from an unreasonable use of property to cause discomfort or harm to another person or group of persons

Nuisance arises when someone has been denied the full enjoyment of his or her own land by substantial and unreasonable interference

The reasonable person referred to in the definition of negligence is someone of normal intelligence who is prudent. The person is average and ordinary under any given circumstances

Actionable Torts

Adjuster determines whether the occurrence could form the basis of an actionable tort

Three elements necessary to constitute an actionable tort

• must be legal duty of care owed-defined in Donoghue V. Stevenson, persons held responsible for damages they cause to others
• must be a breach of that duty-standards of care defined in common law, nature of the statute and the circumstance of the case must be analyzed
• the breach must have caused the damages
• between the breach and the damages there must be a direct chain of causation

Who is an Occupier?

• occupier of property or premises under the common law is the party who has immediate supervision and control of the premises
• define an occupier as
• a person who is in physical possession of premises
• a person who has responsibility for and control over the condition of premises or the activities there carried on, or control over persons allowed to enter the premises

What is Premises Liability?

• premises liability refers to the legal responsibility that arises when injuries to a third party occur accidentally because of negligent maintenance
• occupiers have a duty to maintain their property
• occupiers liability legislation has defined the term "premises" liberally to include such things as lands, structures, railway cars, vehicles and aircraft except while in operation

Trespassers

• in the case of Venoit v. Kerr-Addison Mines Ltd. the Supreme Court of Canada held that a trespasser should be treated with common humanity
• for more facts about this case click here.
• law has sought to relieve an occupier of liability when his or her premises are used by trespassers for recreational use
• attractive nuisance or an allurement attracts a child by its nature
• children are protected by law because a higher standard of care applies

Contractual Liability and Transfer of Liability

• contracts often contain clauses
• disclaimer notice states that the third parties renounce their rights to recovery

Defences

• elements of an actionable tort not met
• adjuster must consider whether there was any duty to avoid the conduct that caused the damage and whether that duty was breached
• review the examples on page 8
• third element of an actionable tort, the third party must show that breach caused the damage
• adjuster must assess any other defences available to the insured according to the particular circumstances of the incident and laws that may apply
• if insured in danger he could plead emergency as a defence
• when insured has no control over the act, could be an act of god such as natural forces
• contributory negligence is conduct on the part of the third party that has combined with acts of the insured to contribute to the damage
• voluntary assumption of risk willingly assumed the risk of injury in certain categories such as:
• rural premises
• golf courses when not open for playing
• private roads reasonably marked by notices and such
• recreational trails reasonably marked by notices as such
• in a case of joint liability when there is more than one tortfeasor, damages will be shared by them in proportion to the degree of fault asssessed against each of them
• limitation periods were covered in an earlier study in this text

Burden of Proof

• adjuster must know whose responsibility it is to provide cause and proof of damages 
• burden of proof usually rests with the person who has sustained damages and wants to recover 
• onus shifted by statute law when a bailee is hired to keep goods for some purpose when the evidence supports that an inference of negligence can be drawn burden of proof on bailees

Strict Liability

• strict liability, where proof of negligence is not required
• applies to owners and occupiers who bring something onto their land that potentially could cause damage should it escape to adjoining property
• only defences against a finding of strict liability are the following:
• act of god
• escape was caused by the third party's actions
• escape was the deliberate act of an outside party
• dangerous thing was on the insured's land with the implied or express consent of the third party
• dangerous thing is authorized to be brought and kept on the insured's land by statute

Absolute Liability

• providing absolute liability imposed by statute
• absolute liability is when damages occur in a prescribed set of circumstance by statute , for which there is no defence

Liability for Animals

• common law doctrine of scienter may apply to domestic pets
• Dog Owner's Liability Act (Ontario) provides that the owner of a dog is liable for damages.."

Parental Liability for Children

• legislation has been passed in many jurisdictions
• parents have not been held liable unless one of the following situations arises:
• child was acting on the parent's express instructions or under their authority
• child was employed by the parent and acting within the scope of employment
• damaged caused by a dangerous thing or animal that the parents had allowed the child to control, such as a motor vehicle

Damages

Compensatory damages include

• special damages
• general damages

Civil Code of Quebec and Liability Claims

• breach of the Civil Code is a breach of statutory duty
• plaintiff who has suffered damages can succeed in a legal action if he or she establishes:
• existence of duty of care
• a breach of that duty
• that damage was caused by that breach

Duty and Standard of Care

Quebec has a prudent and diligent person concept

Extracontractual Liability (Quasi-Delicts)

Liability for One's Negligence

Standard of conduct is an objective one that applies equally to all persons within the same category

Liability for Others' Negligence

• parental liability will arise for minors under their authority
• tutor or curator who has custody of an adult not liable for injury unless tutor is guilty of deliberate or gross fault

Liability for One's Things, Animals, or Buildings

• Civil Code holds a person accountable for damages caused by his or her things, animals, and buildings
• premises liability for one's buildings and property is outline in Article 1467
• owner is liable for damage when this occurs because the building is not being maintained or a defect in construction caused the damage

Burden of Proof

• onus of proof is on bailees and retailers to prove they are not negligent
• there is a presumption of liability against them
• burden of proof is on the person bringing the action

Abuse of Right

Civil Code preserves the requirement of good faith in actions so rights are not exercised with the intent to harm others, or in an excessive or unreasonable manner

Damage Caused by the Breach

• proximate cause rule is applied to show that there was an uninterrupted unfolding of events, without the intervention of another main cause

Personal Liability Policies

Liability policy insuring agreement

• limited to unintentional bodily injury or property damage arising out of the insured's actions anywhere in the world
• extends to provide a legal defence when the insured is sued by a third party
• coverage is on an occurrence basis
• prompt notice of loss required
• insured has a duty to cooperate

Policy Wording

• phrase legally liable to pay means there is a legal obligation for the insured to pay third party damages
• occurrence covered under the policy is an accident
• personal liability policies define bodily injury as
• bodily injury
• sickness or disease
• resulting death
• Property damage is defined as physical damage to, or destruction of, tangible property, and loss of use of tangible property

No Fault Coverage

limited amount of coverage under the policy is available to an insured even when there is no legal liability

(1) Voluntary Medical Payments

• insured required to report the claim promptly and advise of the date, time, place and circumstances of the accident including the name and address of each injured person

(2) Voluntary Payment for Damage to Property

• policy will pay for unintentional direct damage caused to a third party's property even though legally, the insured is not liable
• insurer right to replace or replace the property or may settle
• insured required to give notice of the claim promptly with information about the date, time, place and circumstances of the accident or occurrence

(3) Voluntary Compensation for Residence Employees

• listed benefits are provided for occasional residence employees or permanent residence employees
• recovery efforts will be made if someone other than the insured is responsible for the injury
• insured required to give prompt notice of the loss stating the identify of the residence employee
• insurer has the right to ask the insured to arrange for the injured residence employee

Questions for the Adjuster to Analyze Coverage

1.     Is it an occurrence policy or a claims-made policy?

2.     Does the loss fall within the applicable policy period? When was the claim made against the insured?

3.     Does the insured qualify to be indemnified for the claim presented? Or are they entitled to a defence?

Review how coverage is determined under a liability policy as explained in an earlier study. Litigation is unavoidable in some cases however the preferred practice is for the adjuster to resolve the claim without litigation. The adjuster must assess the strengths and weaknesses of the case.

Exclusions under Liability Policies

• liability insurance only covers civil acts, not criminal or intentional acts, through a tort can be either
• intentional torts are not covered under a liability policy
• liability assumed under contract is not generally covered under a liability policy
• law would have imposed liability even in the absence of a contact

Scope of the Insurer's Duty to Defend

• link between the duty to indemnify and the duty to defend
• duty to defend is a way for insurer to protect their interests when they have a policy obligation to pay any resulting judgment
• does not require a potentially indemnifiable claim

Relevance of Pleadings

• courts have frequently stated that the pleadings govern the duty to defend
• statement of claim alleges the non-intentional torts of negligence, then a duty to defend arises because the exclusion clause does not apply
• courts will look beyond the literal term of the pleadings in order to assess whether the pleadings are supported by the facts

Costs

• plaintiff will be concerned about lawyers' fees, and personal time lost
• adjuster will establish how costs will be dealt with
• steps to be taken to minimize the costs incurred in litigation where appropriate

Investigation of Liability Claims

• identify the insured
• type of premises to be identified
• relationship of claimant to insured
• did the claimant share in the responsibility for the accident?
• communication skills is just as important
• clarify conflicting facts
• circumstances must be carefully investigated
• possible frauds in liability claims must be investigated
• witnesses should be identified
• any history of previous accidents
• relationship of premises to insured to be determined
• determine conditions of the premises
• is the claim a result of a defect or the deterioration of a building
• description of the lighting

Basic details of the incident must be developed

• What are the facts of the case?
• What documentary evidence is available?
• What other information must be developed?
• What is the legal liability of the insured for the occurrence?
• Is there any other party who bears any responsibility for the action?
• Is there any other insurance policy that might come into play?
• Is there a need to retain an expert?

Stairways

• complete description of the stairs
• adjuster to answer certain questions
• photographs might be necessary

Floors

When a person has slipped the adjuster wants to know:

• why the claimant was on the premises
• whether it is a private or public establishment

Researching Case Law

• will provide confidence to adjusters to make decisions on claim files

Study 9 Residential Property Claims

Residential Package Policies and Property Coverage

• adjuster must be familiar with the fundamental aspects of the insured's policy and the law of contract
• claim should be examined in relation to the actual policy wording

Review Framework of a Homeowner's Policy

• Click here to find out all about homeowner's insurance

Review Framework of a Tenant's Policy

Home Business

• property used for business is excluded from personal property
• coverage is available for home businesses by endorsement

Building and Contents

• circumstances of the claim and the type of property damaged must be assessed under the insuring agreement
• adjuster determines which part of the policy covers the loss
• could be significant if all risks coverage is available for contents and named perils coverage is available for building

Residential Property Policy Perils

• insurers typically modify the model wording we have provided in the appendix in some way
• even in all risk policies, some parts of it limit coverage to named perils

Fire

• fire has been defined as a type of combustion
• Fire is a rapid oxidation process with the evolution of heat and light in varying intensities
• Ignition is the process of initiating self-contained combustion
• Combustible indicates that something is capable of burning, generally in air under normal conditions of ambient temperature and pressure, unless otherwise specified.

A hostile fire burns in an areas not intended for fire, burns something within an intended fire area that was not intended to be burned, or escapes the area in which it was intended to burn, thus causing unintended damage

A friendly fire burns as intended within an area where it is supposed to be. A friendly fire has a useful purpose that does not exceed its intended purpose

Another factor to consider concerns the application of heat

• has heat been applied?
• resulting products of fire are in evidence?
• insurer is not liable for damage caused solely by excessive heat from heating apparatus or by any process involving the application of heat where there is no actual fire
• when a fire occurs the adjuster must establish what can be done to minimize the damage

Residential Property Policy Perils

Lightning

• bolt of lightning strikes an insured house, the resulting damage is covered
• lightning may cause damage to electrical appliances by following power lines into a house
• some policies extend to provide coverage for power surges

Explosion

• explosion is commonly associated with a natural gas leak and explosion
• water hammer is a destructive force that may cause noisy, banging sounds as pipes rattle and expand to absorb the pressure wave

Smoke 

• smoke losses result from something other than a fire
• smoke peril covers damage caused by the sudden, unusual, and faulty operation of any heating or cooking unit

Falling Object

• peril covers falling objects that strike the exterior of the building
• no coverage for objects that fall within the house

Impact of Aircraft or Land Vehicle

• peril covers damage done to the dwelling by an aircraft or vehicle

Riot

• three or more people involved in damaging property, could qualify as a riot under the riot peril

Vandalism or Malicious Acts

• intentional defacing of property and malicious mischief is the willful destruction of another's property
• legal distinction between these perils has been unclear
• adjuster need not distinguish between them
• vandalism and malicious acts have recently been at the centre of a legal debate
• proximate cause has been an issue of the debate when mould and fire damages ensures

Water Escape

• named peril policies specifically cover the escape of water from a water supply system
• there are certain aspects to coverage under the peril, but they all relate to plumbing systems
• restrictions on frozen water pipes that have ruptured
• no coverage unless precautions have been taken
• other exclusions for continuous or repeated seepage or leakage of water

Windstorm

• any wind strong enough to cause damage to insured property would qualify under the windstorm peril
• roof damage is the most typical claim
• each claim assessed individually
• policies exclude windstorm damage to outdoor antennae or satellite receivers

Hail

• may cause roof shingles to split
• may be necessary to replace the roof covering
• some common roofing problem that have nothing to do with hail damage
• moisture trapped in the roofing material may cause bubbling
• sheathing that expands and contracts may cause wrinkling
• oils evaporate from the roofing materials may cause an alligator-type pattern on the roofing surface

Glass breakage

• glass that is part of the building is insured against accidental breakage

Transportation

• coverage is provided for property that is damaged while being carried in an automobile or attached trailer

Theft 

• peril covers insured personal property anywhere in the world subject to certain limits
• no coverage for theft caused by a tenant in a part of the insured's home that is rented to the tenant
• does not cover
• theft from a dwelling under construction
• theft of animals, birds, or fish
• by fraud, or trickery, a change of ownership in property takes place with the insured's agreement

A few facts the adjuster may want to establish:

• When the loss occurred and from where
• Who discovered it an when (time and day)
• How the loss was discovered
• If the police have been notified
• Repairs that were done
• What the insured believes happened?

Limits of Insurance

• The following are some typical limitations (review in full on in text):
• jewellery, watches and gems, fur garments, and garments trimmed with fur have typical limit ranges from 2,000 to 5,000
• numismatic property has a limit of $200
• CDs, DVD, audio tapes and video tapes typically have a $250 limit when the loss is from a motor vehicle or watercraft

Electricity

• some policies provide coverage for electrical damage for voltage surges caused by artificially generated electricity

Property Away from the Premises

• question of ownership of the property must be established
• coverage for property owned, worn, or used on the premises of the insured
• personal property of students temporarily living away from home for the purpose of attending school is insured

All Risks Coverage

• adjuster must examine the scope of the insuring agreement to determine whether the loss falls within it
• common loss is mysterious disappearance

Extensions of Coverage

Typically these extensions do not increase the limit of insurance available under the policy

 Debris removal

• removing insured property
• personal property is insured while in transit to another home
• assessments levied against the property owner for the services of a fire department are covered up to 1,000 in a typical extension of coverage

Additional Living Expense

• due to an insured loss the insured has to live somewhere else while repairs are underway
• coverage is also provided for fair rental value
• Review the case study and analysis in your text

Damage Claim Process

• contractor may ask the insured to sign a certificate of completion
• most insurers prefer to have repairs completed and pay a bit for the repair
• determining the ACV requires some negotiation

Basis of Claim Payment

• limited to the financial interest of the insured in the property
• homeowner's building coverage pays for the cost of repairs or replacement without deduction for depreciation
• conditions:
• repairs or replacement must take place at the same location
• same occupancy must be maintained
• materials of the same quality must be used
• repairs or replacement must take place within a reasonable time after the loss

Certain policies offer a single-limit option which allows the insured to use the sum of the insured on building, detached private structures, contents and ALE as a single amount that can be applied to any category as required

• guaranteed replacement cost option on some policies pays to replace the building even if the cost exceeds the amount of insurance purchased
• to assess actual cash value the adjuster determines the value of the property as of the moment immediately preceding the loss
• to fulfill the insurer's obligation, the claim payment must involve the mortgagee
• when property has salvage value, the adjuster must deduct this amount from the claim if the insured keeps the item

Condominium Owners' Claims

• condominium corporation is responsible for insurance coverage on the common elements and the standard units
• deductible owed is an insurable interest to the condominium unit owner
• if a conflict arises the condominium act will prevail

Computer Claims

• fair value of computer equipment requires some knowledge of this class of contents

Mould Damage

• water damage to broadloom is a typical claim scenario
• many companies have a protocol to prevent mould when the claim is covered

Personal Article Floaters

• on a valued basis the insurer and the insured agree that items are worth a particular amount

Review case study and analysis in your text

Estimating Damage Claims

• adjuster review the details with the insured and the chosen contractor
• agreement is reached as to the work to be done
• scope of repair details measured areas room-by-room that have to be repaired, replaced, or refinished

Scoping damage involves the following:

• noting the cause and severity of damage
• identifying each room
• documenting the number of doors, windows and other openings
• detailing each restoration activity
• detailing the damage and what must be done to restore the property starting from the floor to the walls
• review the entire list in your text.
• once the scope is defined it can be circulated to prospective contractors
• insurers may select preferred contractors

Understanding Property Repair Estimates

Repair activity listed by:

• function
• unit amount
• cost per unit
• total cost

Once costs are determined the contractor adds profit and overhead

Broadloom Replacement

• broadloom comes in 12 foot rolls and is sold by the square yard

Review the case study and the analysis in your text.

Roofing Claims

• basis of roof measurement and repair must be understood
• roofs come in a wide variety of styles
• age of roofing material affects repairability
• available suitable colour match
• adjuster must be prepared for hidden costs

Review Hip Roof and types of roofs in the text