Umbrella
Insurance
Chapter 2
How Does Umbrella
Insurance Fit In
With General Liability
Claims?
Liability Insurance for Liability
Exposures:
It is logical that liability insurance would
not exist if there were no liability exposures.
Liability happens under a variety of circumstances, including accidental
deaths, auto accidents, civil suits and a multitude of other incidents. Liability exposures often result in large
losses. Punitive damages tend to be very
large. They are awards to plaintiffs in
excess of full compensation for injuries sustained (called compensatory damages) and are made:
1. to punish the defendant and
2. discourage others from engaging in
similar conduct.
While some types of liability claims can be foreseen and avoided, others
are more difficult to recognize. This
can especially be true for businesses because they are more likely to be
targeted than general citizens.
Torts:
The legal basis for liability claims is torts and contracts. These are
not mutually exclusive in that a person claiming to have been injured or
wronged in some way may seek action either under a tort or a contract, or
in some jurisdictions, under both.
The word "tort" comes from the past participle of the Latin
verb torquere. It means "to
twist", which is from the same root as the word "torture." Funk & Wagnalls standard desk dictionary
(volume 2) defines tort in the following method: "n. Law; Any private or civil wrong by act or omission for
which a civil suit can be brought, but not including breach of
contract." Corley and Robert define
it as "A wrongful act committed by one person against another person or
his property. It is the breach of a legal
duty imposed by law other than by contract." Both are saying a tort is a wrong (other than
breach of contract) for which a civil action can be brought. Most of these claims result from negligence,
but other grounds are also possible:
1. intentional interference,
2. absolute liability, and
3. strict liability.
Intentional Torts:
Sometimes acts are intentional,
although the resulting consequences may not be.
When an intentional act causes injury to another, that act is deemed an intentional tort, even though the
intent may not have been to cause injury.
Even acts that were thought to be beneficial may result in unintentional
harm to others.
Intentional
Interference with the Person:
Intentional
torts may be classified as:
1. intentional interference with the person,
or
2. intentional interference with
property.
Battery, assault, infliction of mental and emotional disturbance,
defamation and false imprisonment are all examples of the first type,
intentional interference with the person.
The second type will be discussed later in this chapter.
Battery:
Battery is intentional, unpermitted and unprivileged contact. Actual contact must be made in order for
battery to exist. It includes not only
the person themselves, but also contact with anything connected or associated
with them, such as the clothes they are wearing, the cars they are driving or
the packages they are carrying.
Therefore, if the person has packages knocked from their arms, or their
jacket tugged, it can be considered battery.
Actual harm is not required for a charge of battery to be legally upheld. In fact, it is not even necessary for
hostility to be involved. For example, a
person is shopping downtown, carrying packages.
A man approaches asking for spare change. The shopper continues attempting to ignore
the man. The beggar then reaches out and
grasps the shopper's arm, though still asking politely (without anger or harsh
words) for change. The moment the man
grabbed the shopper's arm, he could be charged with battery. Only
the absence of expressed or implied consent of the shopper is necessary
to constitute battery.
|
Only
the absence of expressed or implied consent of the shopper is
necessary to constitute battery. |
Some personal contact, however unintentional, occurs every day. Most people would not charge battery. People are bumped by other shoppers,
sometimes even scattering their packages.
Even so, battery is not implied.
Why do battery charges get filed?
Usually because the person feels intimidated in some way. Most of us assume that some unintentional
contact (even undesired contact) with others is inevitable in daily life. We may not like it when another steps on our
foot, but we do not file battery charges against them; it takes a feeling of
intimidation.
Assault:
Assault is an act of violence or the physical threat of violence. It is different from battery because assault
requires apprehension over threatened
contact, whereas battery requires actual
physical contact. It is not
necessary for the aggressor to actually intend to carry out an assault; a
belief by the threatened person that the threat may materialize is enough cause
for action. For example, if a weapon is
pointed at a person, even though no physical action is actually taken, assault
has still occurred, as long as it produced apprehension. On the other hand, if the person was not
aware of the intimidation, no assault occurred because no apprehension
occurred. Verbal insults do not necessarily
mean that assault is involved. If verbal
insults are accompanied by threatening gestures, however, that is an entirely
different matter.
|
Assault
is different from battery because assault requires apprehension
over threatened contact, whereas
battery requires actual physical
contact. |
We often hear of "assault and
battery charges." Assault and
battery do seem to go together. That is
because first the aggressor intimidates causing apprehension (assault), and
then physical contact is made, resulting in battery.
Mental Distress:
Liability can arise from intentional acts that cause another person to
experience mental or emotional distress.
This distress must be proven to be severe and extreme. Insults or abuses that simply cause anxiety
do not qualify. Often the abused person must
actually experience physical illness which was caused by emotional or mental
distress. This is most often seen in
claims from debtors who file claims against creditors for harassing collection
actions.
|
Mental
distress claims often arise from debtors who file such claims against
creditors for harassing collection actions. |
Defamation:
Defamation involves injury to one's reputation. Defamatory acts may be
either libel or slander. Historically,
libel was written defamation while
slander was spoken defamation. The US
has over 302 million social media users as of 2023.[1] This means 90 percent of
the total US population uses social media actively with Facebook being the most
popular social media platform with 74.2% of adults using it. In Canada,
Facebook is also the most popular. The internet has allowed more free speech
than ever before with more opportunities to besmirch another’s character with a
post or a comment – is this freeness of speech or some sort of cyberbullying? Harassment
and cyberbullying are crimes that could lead to a jail or prison sentence.
In order to be legally viable, defamatory statements or written forms
must be intentionally or negligently communicated to someone other than the defamed party. It is not illegal to state or write
defamatory statements directly to the person.
The defamed person must prove that (1) the action was intentional or
negligent and (2) the defamatory meaning is reasonably understood by others.
Defamation
or Slander on Social Media:
In
1995, Congress passed the Communications Decency Act, which protects ISPs, social media platforms and website
hosts from defamation claims. Plaintiffs who believe
they have been defamed online must bring their claims against the person or entity that actually made the defamatory statement, not against the platform that was
used.
Referring
to defamatory comments made on social medias as “slander on social media” is
actually a misnomer, since slander is defined as spoken communication of a false assertion of fact to a third-party,
which subsequently harms another’s reputation.
Libel and slander laws vary widely among jurisdictions. Among these jurisdictions there is
inconsistency, so it is important for those who feel they have been wronged to
seek the correct counsel for the area involved.
Especially in the political environment that emerged during and after
the 2016 presidential election (even before that, some say), there were many
accusations related to defamation and slander. The tone seemed to say: “If you
don’t like someone (or some political party), blog it, tweet it, Facebook it,
or post it online somewhere.” Common courtesy disappeared.
Many professionals who study social issues have said for years that
removing the face-to-face interactions of people have allowed society to lose
all sense of decency and removed the filters that people should have regarding
what is appropriate to say about others. We have even experienced suicide
deaths due to online bullying. Internal filters do not seem to exist in the
context of social media. Defamation has, of course, always existed, but social
media has certainly broadened the aspects of it.
As we know, there is written libel and spoken slander, both of which is
defamation. Since slander is spoken, lawsuits typically center on libel,
although this is changing. Since social media has made the spoken word seem
part of statements on social media, these separate legal terms have been
muddied to some extent. Since defamation is termed a statement that is
communicated to a third party, making a claim either expressly or implied to be
factual, injuring another’s reputation or causing others not to associate with
the person, this term seems to fit best when lawsuits are initiated. Malicious
intent is not typically required for a lawsuit but is often involved in the
social media communications.
Most states have what is termed “media shield laws” to protect members
of the press and other types of media organizations, but not all states. Even
in those states that do have media shield laws, they often do not include
bloggers or the internet in general, meaning those that are sued cannot hide
behind the shield laws. If statements are made that claim to be or appear to be
factual, but are not, the writer can be sued.
This would not include such things as reviews of a restaurant meal or
the service receive at a department store, because reviews are known to be
opinions, not statements of fact. Opinions are allowed because they are not
presented as facts, even if the opinions expressed are negative. Truth is
always what a defamation claim is about, not opinions. Therefore, when
statements are presented as truth or facts, there must be something that backs
up that “fact.” If there is no factual evidence backing the statements made, it
becomes defamation.
Legally, defamation requires that the statement made were asserted to be
factual. Professional bloggers, users of online forums, chats, and social
networks or platforms tend to be very clear that they post opinions, not
statements of facts. They are clear about this to prevent lawsuits. Those who
try to persuade others with nonfactual statements either try to hide the
origins of them or have chosen to live dangerously by presenting opinions as
fact. We saw a lot of this when Russia inserted nonfactual stories and
statements during the 2016 Presidential elections. They did so to persuade
Americans to vote a certain way based on lies and deceit. Russia was not
necessarily for or against a certain political party, as evidenced by the fact
that they inserted false information about many politicians. While Russia may
have favored some specific politicians, mostly they favored Russia in some way.
In other words, the Americans they favored would fulfill some goal Russia had.
Russian interference has been confirmed not only by American authorities, but
also by many European countries as well. It is universally accepted by those
who know and work with cyber issues. It is confirmed to have happened to
politicians in all political parties, in multiple countries, and continues to
happen. Obviously, defamation lawsuits will not be filed against Russia. Russia’s
interference comes under cyber crime instead.
False Imprisonment:
False Imprisonment has been used far more than most people realize. False imprisonment is the intentional
restraint of another's freedom of movement.
Years ago, this was used to free our nations so-called mentally ill from
undesired institutionalization. It is
now much harder to commit those we feel are mentally incompetent because of
false imprisonment laws.
For a false imprisonment liability claim to occur, the imprisonment must
be total, even if it happens to be brief. It must be an intentional act, although not
necessarily malicious in nature. The
restraint need not be physical, but it must contain threats of physicalness or
force which would intimidate the person into compliance.
Sometimes false imprisonment is confused with malicious prosecution,
which is the malicious institution of groundless criminal proceedings against
another person.
Intentional
Interference with Property:
This has become widespread and often goes unpunished because the guilty
party is not known. There are multiple
types of interference:
Trespass:
Trespass involves real property
rather than personal property. Real
property is land and the items attached to it.
Trespass is the wrongful entry upon the land of another or the failure
to remove property from another's land when an obligation exists to do so. Trespass includes entry of the area above and
below the land as well as the surface of the land. In other words, when a trespass order exists,
it is illegal to fly over the land in a plane or balloon as well walk upon the
actual surface. It would also be illegal
to dig or otherwise enter below the surface.
It is not necessary to establish that any damage to the property
happened for a liability claim to be filed.
Trespass exists by merely entering or walking into the area
forbidden. The original trespass order,
however, probably came about due to damage or interference of some kind.
Conversion:
Conversion is the intentional interference with the personal property of
others. Personal property is anything
capable of being owned that is not real property. Personal property would include everything
that is not land or items permanently attached to land, such as crops
and houses. For conversion to exist,
there must be action which was designed to deprive the owner of the property
from use and possession to such a degree that a forced sale of the property
existed.
|
For
conversion to exist there must be action which deprived the owner of property
use and possession to such a degree that a forced sale of the property to the
converter is justified. |
Conversion is accomplished by:
1.
taking
possession to exercise control which is adverse to the owner;
2.
depriving
the owner of control through an unauthorized transfer;
3.
refusing
to surrender goods to the one who has a legal right to them;
4.
misusing
an owner's possessions without authorization (such as driving a car left at a
parking lot or business); and
5.
intentional
damage to, destruction of, or alteration of property. This could include changing the appearance of
something with the intent of confiscating the property.
The point of tort law dealing with conversion is to give the wronged
person the ability to recover the property or its value of which they were
wrongly deprived.
Privilege:
Some activities do not bring about liability. A person will not be held liable for an
intentional tort if the conduct is considered privileged. For this to be
the case, the person must have acted in a manner which served public
interest. Of course, not all will agree on
this. Whether or not the action is
considered privileged will depend upon the circumstances involved and the
attitude of the court. There is no
assurance that conduct will be considered privileged in most cases. Common situations that are deemed privileged
by the courts include mistakes, consent and protective acts.
Mistakes:
Even though an act may be a mistake, whether
it is privileged will depend upon specific circumstances; many
"mistakes" are not exempt from liability claims. A mistake that is often considered privileged
involves acts causing damage that were intended to protect another's rights
(even if the danger is mistaken and did not actually exist).
Consent:
When consent exists and damage results, it is often considered privileged. Therefore, no liability claim would
exist. If someone has given permission
to another to perform a specific task and damage results, liability may not
exist, due to the given consent.
Protective Acts:
When actions or reasonable force
is necessary to protect another from harm, privilege usually exists. In fact, a person is typically privileged to
use reasonable force to prevent interference with one's own property or person,
as well as others.
|
It
is very important to point out that reasonable
force is allowable; what is reasonable often has to be determined by the
courts. |
It is very important to point out that reasonable force is allowable; what is reasonable often has to be
determined by the courts. Killing someone who is stealing is not necessarily
reasonable force. Killing someone who is raping another person would be
reasonable, while killing someone for stealing a bicycle would probably not be
considered reasonable force.
There are no guarantees when it comes to privilege. Courts are not always consistent in their
rulings, although we do have an appeals process when we think the courts are
wrong. It would be foolish to act simply
because we felt the action would be privileged.
Most acts ruled privileged depend upon some measure of common sense,
however.
Absolute Liability:
There are different types of liability. One type is absolute liability.
Absolute liability is sometimes known as Liability Without Fault. It
is imposed where public policy demands that a person be held liable for
specific acts, even if the acts were neither intentionally nor negligently
inflicted. Sometimes people actually
make this type of claim more likely. One
example of this are those who post signs such as "Danger-Bad
Dog." This implies prior knowledge
of a dangerous situation.
Absolute liability can result from many different situations. This might include such things as damage from
earth vibrations as a result of blasting operations, aircraft use, storage of
dangerous materials and potentially dangerous animals. Keeping wild animals imposes absolute
liability even if their keepers have domesticated them. Basically, the rationale of absolute
liability is that in ultra-dangerous activities where losses are inevitable at
some point, the loss is shifted to those best able to control it.
Absolute liability, like other types of liability, will vary with the
location. There may always be local
modifications or interpretations.
Strict Liability:
Strict liability is typically applied to product liability, rather than personal acts. It is felt that manufacturers and
merchandisers of goods are held liable for injuries caused by the defective
products they produce. This could be
true even if the manufacturer had no intentional negligence or fault. The claimant must prove that the product was
defective and that the defect produced unreasonable danger. Manufacturers may not be liable if the
product was experimental or for products that are unavoidably unsafe. Many sports products are considered
unavoidably unsafe, for example. For a claim
to be valid, the product must have been used as intended. This is an important point, since many
products would become unsafe if used outside of their intended parameters.
Negligence:
Most policyholders are aware of negligence claims and this is where
insurance agents are most likely to become involved when selling products. Everyone is exposed to loss from damage
claims involving allegations of negligence.
Law requires all persons to use care in their actions to prevent
negligence. If a person fails to perform
as a reasonable and prudent person would under similar circumstances, a
negligence claim can occur if someone is injured or property is damaged.
Obviously, an injury or loss must occur before a claim can be
filed. While this might seem like an
obvious statement, there have been misunderstandings. Even if a person is acting recklessly, if no
injury or loss results, there can be no claim filed.
It should also be pointed out that negligence claims are always
unintentional. Intentional acts would
fall under battery or assault.
Negligence can be due to carelessness, thoughtlessness, forgetfulness,
bad judgment, or stupidity. It can even
result from a bad temper. Negligence
never involves intent, even if bad temper is involved. A negligent person has no desire to cause
harm, but because of some type of negligent behavior, he or she does so.
A Reasonable Man:
We often hear, in the insurance industry, the
term "the prudent and reasonable man" rule. This is the standard used for determining
negligence claims. It was established by
the Common Law of England. Although they
never talk of a "reasonable woman", the intent is to cover both
equally. The assumption is that the term
"man" covers the human race as a whole.
A reasonable man is assumed to have the minimum perception, memory,
experience and information common to the community in general. He is considered to have normal intelligence
and mental capacity. Therefore, this
definition would exclude the legally insane, children not of legal age, and
those who are senile or have some other mental impairment. When it involves a trade or profession, such
as an insurance agent, they are also expected to have corresponding knowledge.
End of Chapter 2