SABU LAMA

UNIT 2: LIABILITY INSURANCE

1. What is liability insurance?

Those types of insurance that provides protection against loss and damages to
individual, individual property, business and business property.

2. What is negligence?
Negligence is another type of tort insurance that is unintentional though leads to
substantial liability.

3. What is tort liability insurance? Mention the types of tort liability insurance.
Tort liability insurance is that type of insurance that provides protection against any
intentional or unintentional loss and damages in the form of money damages or
monetary terms.
There are four types of tort liability insurance:
 Intentional tort liability
 Negligence
 Strict liability
 Absolute liability

4. What is strict negligence?

Strict negligence is that type of tort insurance in which loss and damages are
compensated through legal provision or by laws procedure.

5. What is product liability insurance?

Product liability insurance is that type of insurance that provides protection against
loss or damages done due to the consumption of any product manufactured by policy
holders. It also includes fees that arise from legal action against the policyholders
because of the product.
6. What is professional indemnity insurance?
In the course of exercising professional conduct, due to mishandling or negligence, if
any parties suffer loss or damages. The insurance policy done to cover such loss or
damages is called professional indemnity insurance.

7. What is personal liability insurance?

Personal liability insurance is that type of insurance that provides protection against
loss or damages due to individual policyholder or anything concerned with the
policyholders.

8. Explain different types of tort insurance.

Tort liability insurance is that type of insurance that provides protection against any
intentional or unintentional loss and damages in the form of money damages or
monetary terms
The different types of tort insurance are as follows:
 Intentional tort liability: legal liability that arises from an intentional act or
omission that result in harm or injury to another person or damages to person’s
property. Example of intentional torts includes assault, battery, trespass, false
imprisonment, fault, libel, slander and patent or copyright infringement.
 Negligence: It is another type of tort insurance that can result in substantial
liability. It is defined as the failure to exercise the standard of care required by
law to protect others from an unreasonable risk or harm. If there is no legal
duty imposed by law, we are not liable to pay. For example: we may be a
champion swimmer, but we have no legal obligation to dive into a swimming
pool to save a 2 years old from drowning. To be guilty of negligence, there
must first be a legal duty to protect other from harm.
 Strict liability/ absolute liability: because the potential harm to an individual or
society is so great, some people may be held liable for the harm or injury done
to others even though negligence cannot be proven. Strict liability means that
liability is imposed regardless of negligence or fault. Some situations in which
 strict liability applies are blasting operations, manufacturing of explosives,
crop spraying from airplanes.

9. Explain different types of liability insurance.

Liability insurance is that type of insurance that provides protection against loss and
damages done to individual, individual’s property, business and/ or business’
property.
Different types of liability insurance are listed below:
 Personal liability insurance
 Product liability insurance
 Professional indemnification insurance
 Commercial liability law
 Negligence
 Third party liability
 Tort insurance.

Explanation:

 Personal liability insurance: Those insurance policy that provides protection against
loss and damages done due to individual policyholders or anything that’s related to
policyholders. It indemnify against loss or damages to individual, individual’s
property, business or business property. Example: If my dog bites my neighbor, the
damages and loss falls under personal liability and the policyholder is liable to pay.
 Product liability insurance: Those insurance policy that provides protection against
loss and damages done due to the consumption or use of product manufactured by the
policyholders. Under such circumstances, the policyholder is liable to pay to injured
user. For example: In pharmaceutical industry, if any individual suffers loss and
damages due to consumption of medicine manufactured by them, they are liable to
pay for such loss.
 Professional Indemnification Insurance: Those insurance policy that provides
protection against loss and damages in during exercise of professional conduct. Under
such circumstances, the professional (for example: doctor) is liable to pay for any loss
or damages. For example: In case of profession like doctors, in case of their
mishandling, patients either suffers severe injury or dies, the doctor is liable to pay . if
 insurance is done for those purposes, it is called professional indemnification
insurance.

 Third Party Insurance: In insurance, there are generally two parties, insured and
insurer. Other than these two mentions, all other entities are third parties in liability
insurance. So, to indemnify against loss or damages done to those third parties, the
insurance policy is called third party insurance. Third party insurance is compulsory
in vehicle in Nepal. For example: In case the policyholder unintentionally caused
accident in which other rider has suffered injury or vehicle got damaged. Here, the
insurer protects policy holders against such loss and damages to its policy holders.

 Commercial Liability Insurance: Those insurance policy that provides protection

against loss and damages done due to conduct of commercial business such as hotels,
industry, restaurant etc. It covers loss and damages against other commercial sectors,
individual, client and society. For example: A chemical factory released toxic
chemical into river. And that river is only source of water for nearby villages. The
chemical factory is responsible to indemnify loss and damages done due to
consumption of water to any parties either individual, group or whole society.

 Negligence: It is typically defined as the failure to exercise the standard of care

required by law to protect others from an unreasonable risk of harm. The meaning of
the standard care is based on the care required of a reasonably prudent person. In
other words, our action are compared with the actions of a reasonably prudent person
under the same circumstances. If our conduct and behavior are below the standard of
care required of a reasonably prudent person, we can be found negligent.

 Elements of negligence:
 Existence of a legal duty
 Failure to perform that duty
 Damage or injury to the claimant
 Proximate cause relationship between the negligent act and the
infliction of damage
 Tort Insurance: Tort is a legal wrong for which the law allows a remedy in the form
of money damages. The person who is injured or harmed by the actions of another
party can sue for damages. Tort generally can be classified into three categories:
 Intentional torts- legal liability that arise from an intentional act or
omission that results in harm or injury to another or damages to the
person’s property.
 Strict liability (absolute liability)- it means that liability that is imposed
regardless of negligence or fault. Example: blasting operations,
manufacturing of explosives.
 Negligence: It is the failure to exercise the standard of care required by
law to protect others from an unreasonable risk of harm.