EXPOSURE TO LOSS: THE NEED FOR CGL INSURANCE

EXPOSURE TO LOSS:

THE NEED FOR CGL INSURANCE

In general, the purpose of law is to protect those legal rights of individuals and entities that are governed by the law. Liability loss exposures arise out of legal wrongs. The three broad classes of legal wrongs are tort, crime, and breach of contract, with each being addresssed by branches of law. Criminal law is enforced by the government to protect the legal rights of its population from hard due to the improper use of force or deception. Contractual law protects legal rights of parties who have voluntarily entered into contractual agreements. Tort law protects the rights of individuals from civic wrongs. Victims of tort generally have monetary remedies available under common law. Although criminal violations are not generally the subject of general liability insurance, there are occassions where a criminal act may also impose civil liability with monetary awards as remedies. General liability insurance concerns itself with tort liability.

A tort is a civil wrong, other than a breach of contract, for which the law provides money damages as a possible remedy. In order for a tort to occur, there must be an unjustified breach of a legal duty casuing direct damage. Examples of the rights of individuals, which other individuals or entities have the legal duty to respect, are: freedom from bodily injury or property damage; freedom from interference with family relationships; freedom from psychological trauma;freedom from interference with economic rights;and freedom from damage to public image.

A tort may be either intentional or unintentional. An example of an unintentional tort would involve an injury to a person as a result of negligence. This is the type of tort liability that is the primary subject of general liablity insurance. However, liability for some types of intentional torts may also be covered by the CGL. An "intentional tort" is a "tort or wrong perpetrated by one who intends to do that which the law has declared wrong as contrasted with negligence in which the tortfeasor fails to exercise that degree of care in doing what is otherwise permissible. Libel, slander, and false arrest are examples of intentional torts for which liability coverage is available under the CGL policy.

The following is a brief listing of breaches of duties that violate legal rights, can cause the imposition of legal liability, and may be insured by a CGL policy.

• Battery
• False Arrest
• Damage to property of others
• Disparagement of goods
• Defamation of character
• Invasion of privacy
• Assault
• Malicious prosecution

A criminal act is a public wrong (i.e., a violation of a duty owed to society as a whole) for which society seeks punishment of the perpetrator. Sometimes criminal acts may also have private or civil consequences. Only when this is true and monetary damages are awarded as remedies will criminal activities be the subject of general liability insurance. One example of this situation is assault and battery. An employer may be held vicariously liable should an employee injure a third party while trying to protect the employer's property, a situation which may be covered by general liability insurance. A second example involves manslaughter, the unlawful killing of another human being without malice or deliberation. Involuntary manslaughter may occur, for example, when an individual causes the death of another because of gross negligence in the operation of mobile equipment. Again, a general liability policy may respond in the payment of monetary remedies on behalf of the insured in such a situation. Coverage may apply even if the tort is considered intentional because the loss is fortuitous from the point of view of the insured.

Contractual agreements voluntarily entered into by entities or individuals create legal duties owed to the other contracting entities. Any violation or breach of a contractual agreement is a civil (versus public) wrong for which one possible remedy is monetary awards. Duties that may be imposed by contracts are quite broad and may include an agreement to perform in a certain manner, to complete a project in a specified length of time, to deliver a quality product, or to assume the legally imposed duties of others. General liability inurance concerns itself with an extremely limited area of possible contractual agreements. It is possible to assume the tort liability of another contracting party through the use of hold harmless or indemnity agreements in contracts. In other words, one party to a contract can agree to respond to monetary damages imposed on another contracting party because of the second contracting party's breach ofa duty owed to a third party. The general liability policy can be structured to respond on behalf of the individual or entity who assumed the tort liability of another through a contractual (e.g., hold harmless or indemnity) provision. Such liability transferred through contracts is virtually the only area of covered through general liability insurance.

For more information or to get a commercial general liability quote, please visit http://www.bhains.com/ or contact Branch-Hernandez & Associates Direct at 702-648-6887