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Liability Basics - How is Liability Determined?

What is liability?

Simply put, liability is the responsibility of one party to another.  When there is legal liability, this responsibility or obligation is enforceable in the court of law.  For there to be legal liability, usually one of the following are established:

1.  Committing a tort

2.  Violation of a statute

3.  Assumption of responsibility in a contract or contractual liability

Since there needs to be a basis to of which liability policies respond to claims, it must determined what legal obligation one party has to another. Therefore, noting the above, if a party commits a civil wrongdoing or tort against another, the wrong doer or tortfeasor can become liable for his/her actions.  This type of wrong doing or tort may be the result of the tortfeasor’s negligence.

Negligence can be defined a failure to exercise a duty of care to protect others from risk or injury.  This duty is often based on the principal of what what a prudent person do in respect to exercising the level of care to others (sometime referred to as the prudent person or prudent man doctrine).  

The Four Elements of Negligence

Legal Duty or the Standard of Care - The duty owed by one party to another.  

Breach of Duty - The failure to exercise the duty.  

Proximate Cause - What is considered the cause of the claim.  The start in the sequence of events that led to the loss.  

Actual Loss or Damage - In the event of a loss, the reduction of the financial position of the injured party needs to be determined.  This value is stated as the damages and is calculated to measure the amount for compensation.  The compensation attempts to make the injured party financially whole or put them in the same financial position prior to the loss.  Therefore, damages are the amount of monies needed to reimburse the injured party for their financial loss.  This amount may not include any compensation for pain and suffering.   

Prudent Person (previously Prudent Man) Rule

What is a prudent person and how is negligence determined?  It is often a subjective process in determining a prudent person, but most often it is asked, ‘what would an ordinary person, in the right frame of mine do in a particular situation?’  Hence, there are comparable situations for relating many situations.  

Would a 12 year old be held to a higher degree than a six year old?  Hence, determining how a prudent person would respond in a situation can be difficult, but the rule it is often based on the general level of their peers and the peer class can be further broken down by age, region, industry, education, etc.  Insurance adjusters, judges, and juries often determine negligence by comparing the acts of one to a prudent person.  


What are possible defenses that the defendant’s insurance company may use?

The explanations written by William F. Schaake, CIC, CRM herein is intended to provide a basic understanding of the terms and concepts. This information provided is not intended to provide legal advice or opinions. Please check with your legal council and the terms and conditions of your insurance contract.  © 11/19/2011

A doctor has a duty to ask a patient for potential allergic reactions to antibiotics before prescribing the medicine.   

The doctor prescribes the antibiotics without first inquiring the patient’s potential allergic reactions.     

The writing of the prescription which led to the patient filling the order and consuming the antibiotic that led to the allergic reaction.   

After consuming the antibiotics prescribed by the physician, the patient becomes seriously ill and is hospitalized.  The patient did not carry hospitalization insurance and suffers a great financial loss.     

If a landscape contractor was hired to plant trees and accidentally cut the underground utility lines, it can be asked, ‘what would a normal landscape contractor do prior to digging the holes necessary prior to planting the trees?’.  Would a prudent landscape contractor test the grounds or contact local utility company prior to digging to verify the line depths?