CPCU 552 - CHAPTER 1 EXAM QUESTIONS AND
ANSWERS WITH COMPLETE SOLUTIONS
Loss exposure
the possibility of experiencing a loss
Liability loss
the money paid by a person or organization as a result of a legal claim against that
person or organization
Legal liability
the legal obligation of one party to pay damages to another party
Damages
money paid by one party to another as compensation for a loss or injury
Criminal law
applies to acts that injure the state or society; criminal liability exposures are not
insurable
Civil law
applies to acts that injure citizens
Tort
a wrongful act or omission that invades a legally protected right and is not a crime or a
breach of contract
Negligence
, an unintentional tort in which the defendant (aka the negligent person) failed to exercise
the standard of care he owed the plaintiff (aka the claimant)
Intentional tort
must involve intentional activity, but need not involve intentional injury
Libel
a written, false, public statement that results in the plaintiff's loss of (damaged)
reputation or esteem
Strict liability
imposed on inherently dangerous, but socially acceptable, activities
Absolute liability
another term for strict liability
Contract
a legally enforceable agreement between two or more parties in which each party
promises something to the other
Breach of contract
involves failure to perform as voluntarily promised
Warranty
a promise made by a seller about its product
Hold harmless agreement (indemnity agreement)
obligates one party (the indemnitor) to pay certain losses (contractually assumed)
sustained by another party (the indemnitee)
Indemnity agreement
another term for hold harmless agreement
ANSWERS WITH COMPLETE SOLUTIONS
Loss exposure
the possibility of experiencing a loss
Liability loss
the money paid by a person or organization as a result of a legal claim against that
person or organization
Legal liability
the legal obligation of one party to pay damages to another party
Damages
money paid by one party to another as compensation for a loss or injury
Criminal law
applies to acts that injure the state or society; criminal liability exposures are not
insurable
Civil law
applies to acts that injure citizens
Tort
a wrongful act or omission that invades a legally protected right and is not a crime or a
breach of contract
Negligence
, an unintentional tort in which the defendant (aka the negligent person) failed to exercise
the standard of care he owed the plaintiff (aka the claimant)
Intentional tort
must involve intentional activity, but need not involve intentional injury
Libel
a written, false, public statement that results in the plaintiff's loss of (damaged)
reputation or esteem
Strict liability
imposed on inherently dangerous, but socially acceptable, activities
Absolute liability
another term for strict liability
Contract
a legally enforceable agreement between two or more parties in which each party
promises something to the other
Breach of contract
involves failure to perform as voluntarily promised
Warranty
a promise made by a seller about its product
Hold harmless agreement (indemnity agreement)
obligates one party (the indemnitor) to pay certain losses (contractually assumed)
sustained by another party (the indemnitee)
Indemnity agreement
another term for hold harmless agreement
