LIABILITY

INSURANCE
INTRODUCTION
Determine
the nature
of liability
insurance
01Define liability insurance

02 Describe the purposes of

liability insurance

03 Identify main insureds in

liability insurance
 DEFINITION
• All individuals and organizations both commercial
and non-commercial face liability exposures for their
activities, commercial organizations are exposed
more to liability losses than others.
• A liability loss is an amount that a person is required
to pay as a result of legal claim against him for his
wrongful acts causing injury or damage to others.
Wrongful acts causing legal liability or claim may
arise from any of the following bases:
1. Torts or Common Law
2. Statutes
3. Contracts
TOR
T
• A tort is a wrongful act or omission-
causing harm to others (negligence) or
invading other’s protected rights
(nuisance).

• If someone’s acts of negligence or

nuisance cause harms to others, the law
provides for remedy to the victim through
an action for damages or compensation.
This is the legal liability exposure.
TRANSFER THE
LIABILITY • Each and everyone in the society do have
such legal liability exposure and the degree of
exposures varies with the nature and volume
of social or economic activity of the individual.
• An individual or organization can transfer such
liability exposure (only civil) to an insurance
company through an appropriate liability policy

Insurance
Transfer risk company
LIABILITY vs
INSURANCE

• Any type of insurance policy that protects an individual

or business from the risk that they may be sued and
held legally liable for something such as
malpractice, injury or negligence.

• Liability insurance policies cover both legal costs and

any legal pay-outs for which the insured would be
responsible if found legally liable.

• Intentional damage and contractual liabilities are

typically not covered in these types of policies.
WHO ARE THE
INSUREDS?

• Liability insurance is very important for those

who may be held legally liable for the injuries
of others, especially medical practitioners,
lawyers and business owners.

Example:
• A product manufacturer may purchase
product liability insurance to cover them if a
product is faulty and causes damage to the
purchasers or any other third party.
WHO ARE THE
INSUREDS?

• Business owners may purchase liability

insurance that covers an employee is
injured during business operations.
• Legal liabilities can arise in many ways.
Protection from these liabilities are made
available by affecting an appropriate
policy or a range of policies.
Determine
the legal
liability
may arise
in liability
insurance
WHAT IS
LEGAL LIABILITY?

• Obligation which the law may

impose on the person considered to
be responsible for the breach of any
legal duty.
• It is a responsibility imposed by the
law on a person.  
FORMS OF LEGAL
LIABILITY
 
The responsibility imposed may require the
person to perform one/more of the
following;
• Award of damages-money, to be paid to a person as
compensation for loss or injury. 

• Injunction- a judicial order restraining a person from beginning or

continuing an action threatening or invading the legal right of another, or compelling
a person to carry out a certain act

• Order for specific performance-Specific

performance is an equitable remedy in the law of contract, whereby a court issues
an order requiring a party to perform a specific act
BASES OF
LEGAL LIABILITY
  It may arise in 2 ways:

• Under Contract
• when one of the parties fail to perform his
obligation under the contract
• ie. Breach of contract
• In tort
• as a member of society, everyone is expected
to confirm to certain minimum standards of
conduct.
• When a person fails to observe the minimum
standards imposed, he faces legal liability.
ELEMENTS
OF CONTRACT

• Offer- proposal is necessary for the formation of an agreement

• Offer and acceptance- when the person to whom the
proposal is made signifies his assent thereto, the proposal is said to
have been accepted

• Intention to create legal relations- promises

between two parties

• Consideration-Something of value was promised in

exchange for the specified action or non action.
WHAT IS
TORT?

TORTS = TORTIOUS LIABILITY

A ‘wrong’ in its most unethical sense.
A tort may consist of either a
wrongful act or omission which is not
authorized by the law.
GENERAL FEATURES
OF A TORT

Generally, the features of a tort are:

1.There must be a wrongful or unauthorized act or
omission
2.That wrongful or unauthorized act or omission
affects the interests or rights of others
3.The injured party or victim has a right to a claim
for damages
The general rule is that an act or an omission
which does not give rise to an action for damages is
generally not a tort. It will be seen later, that there are
exceptions to this.
SOURCES OF
TORT

• Intentional Tort
• arise from intentional act/omission that
result in harm/injury to another person
/damage to the persons property.
• Eg: assault, battery, conversion, fraud, false
imprisonment, trespassing & invasion of
privacy.
• Battery- if A intentionally hits B without the
latter’s consent
• False imprisonment- A without any lawful
justification locks B up in a room
SOURCES OF
TORT

Absolute liability
liability imposed regardless of
negligence/fault called strict liability

Negligence
• failure to exercise the standard of
care required by law
• Eg: A carelessly omitted to brake his
car when he had clearly noticed that B
was crossing the road with the result
that B suffered injuries.
CONTRACTUAL vs
TORTIOUS LIABILITY

• Need for an agreement- Offer and acceptance

• Doctrine of privity-The doctrine of privity in the
common law of contract provides that a contract
cannot confer rights or impose obligations arising
under it on any person or agent except the parties
to it. The premise is that only parties to contracts
should be able to sue to enforce their rights or
claim damages as such.
CONTRACTUAL vs
TORTIOUS LIABILITY

• Award of damages-In law, damages are an award,

typically of money, to be paid to a person as compensation
for loss or injury. The rules for damages can and frequently
do vary based on the type of claim which is presented (e.g.,
breach of contract versus a tort claim) and the jurisdiction.
• Limitation- Under common law, parties are only liable for
foreseeable damages, not for unforeseeable damages.
Often, the limitations on liability clause is a simple
restatement of this common law principle, that neither party
would be liable for unforeseeable losses suffered by the
other
THANK YOU