CAIB 3 Ch 1 - Commercial Liability - Nov 2024 PDF

CAIB 3: Chapter 1 Commercial Liability – A Legal Perspective CAIB 3  CAIB 3 Section 1 The Law – An Introdruction The Law - An Introduction to Legal Rights and Responsibilities Canadians have certain legal right...

CAIB 3: Chapter 1 Commercial Liability – A Legal Perspective CAIB 3  CAIB 3 Section 1 The Law – An Introdruction The Law - An Introduction to Legal Rights and Responsibilities Canadians have certain legal rights that are protected and enforced by the state. Legal rights include Equality Language rights Personal privacy Protection of property Freedom from physical injury. Invasion of legal rights constitutes a legal wrong, categorized as either criminal or civil. CAIB 3 Criminal vs. Civil Law and Legal Remedies Criminal law focuses on protecting society, with punitive measures. Civil law addresses private disputes and typically provides compensation. The law provides remedies when someone’s rights are infringed. Note: Legal interpretations vary between provinces; legal inquiries should go to qualified practitioners. CAIB 3 Criminal Law – Overview and Key Principles Criminal wrongs are actions deemed harmful to the state. The Canadian Criminal Code defines criminal conduct and prescribes punishments. Examples of criminal wrongs include: Dangerous driving, impaired driving, and other automobile offenses. Drug possession and trafficking, murder, theft, and more. CAIB 3 Criminal Law – Prosecution and Punishment The state prosecutes individuals or entities that commit criminal acts. Criminal law focuses on punishment rather than compensating victims. Penalties include fines, imprisonment, and sanctions; courts may also order victim compensation. CAIB 3 Civil Law – Understanding Private Rights and Remedies Civil law focuses on private rights and remedies, addressing disputes between individuals or organizations. Also known as private law, it contrasts with criminal law, which deals with offenses against society. Civil law includes tort law (wrongful acts) and contract law (breaches of agreements). CAIB 3 Tort Law – Purpose and Types of Torts Tort law allows victims to seek compensation for harm caused by others. The term tort originally meant “wrong” or “injustice” and refers to a civil wrong, not a contract breach. Torts are categorized into intentional and unintentional (negligent) acts. CAIB 3 Types of Torts – Intentional vs. Unintentional Unintentional Torts Intentional Torts (Negligence) Other torts include Includes actions like defamation, false assault, conversion of Involves careless arrest, nuisance, and goods, and deceit. conduct leading to trespass. financial loss or injury. CAIB 3 Contract Law – Understanding Breach of Contract Breach of contract: Breaches occur when one The injured party can seek Failure to fulfill a promise party doesn’t meet their court remedies such as or obligation without legal contractual obligations, financial compensation or justification. causing harm to the other specific performance. party. CAIB 3 How Laws are Established – Common Law and the Rule of Precedent Canadian law is based on common law and statute law (except in Quebec). Common law relies on the Rule of Precedent, where courts follow past decisions in similar cases. Precedents can be overturned as societal views and legal standards evolve. CAIB 3  Statute law consists of written laws created by federal and provincial governments. Statute Law – The Role of Statute law supersedes or amends common law, ensuring laws reflect Written current societal values. Legislation Statutes can create new laws, consolidate existing laws, or replace outdated ones. CAIB 3  Damages in tort aim to compensate victims for losses Damages in caused by another party’s actions. Tort – Courts award monetary Overview compensation to address the harm suffered. and Purpose Types of damages include Compensatory Exemplary/punitive Nominal. CAIB 3 Compensatory Damages – Bodily Injury Compensatory damages are awarded to cover actual injury or property damage. Bodily injury damages are split into general and special categories. General damages cover non- economic losses. Special damages cover out-of- pocket expenses. CAIB 3 General Damages – Pecuniary and Non-Pecuniary Losses General damages address losses that aren’t easily quantified in money. Examples include Pain and Suffering Inconvenience Future earnings Awarded at the court’s discretion, based on the impact of the injury. CAIB 3 Special Damages – Out- of-Pocket Expenses Special damages cover quantifiable losses directly linked to the injury. Examples include medical expenses, nursing fees, travel costs, and lost income. These damages are itemized and must be proven by the plaintiff. CAIB 3 Property Damage – Measure of Loss Property damage awards Courts assess the Loss of use is also are based on the loss difference in property considered, covering value resulting from the value before and after costs of alternatives while incident. damage. property is restored. CAIB 3 Exemplary or Punitive Damages – Purpose and Conditions Exemplary or punitive damages are rare in Canada, awarded for severe misconduct. These damages punish the defendant for malice, violence, or fraud. Intended to deter similar behavior by making an example of the defendant. CAIB 3 Nominal Damages – Establishing Legal Rights Nominal damages Awarded when Typical awards are confirm a legal right principle or a legal minimal, sometimes as when no significant loss question is at stake, not low as $1. has occurred. for compensation. How Damages Are Determined – Role of the Jury and Settlements Juries often determine the amount of damages in court cases. Judges handle matters of law, while juries rule on the facts and award sums. Most cases settle out of court, with settlements reflecting likely court outcomes. Remedies for Breach of Contract Damages: Financial Specific Performance: Injunction and Rescission: compensation to the injured Court enforces fulfillment of Prohibits or compels certain party as if the contract had the contract terms. actions; rescission returns been fulfilled. parties to pre-contract positions. Checkpoint Challenge  CAIB 3 Section 2 Commercial or Business Liability Exposures The Broker’s Role in Identifying Liability Exposures Brokers conduct surveys to identify potential liability exposures for businesses. A thorough survey helps identify risks that could lead to liability claims. Brokers need basic legal knowledge to understand laws impacting clients. Basis of Legal Action – Common Law and Negligence Businesses may cause injury or damage that could lead to liability claims. Liability can arise under common law or statute law. Negligence: A key tort in common law, requiring proof of a failure to exercise due care. To prove negligence, the plaintiff must show: 1. The defendant had a duty to exercise reasonable care. 2. The defendant breached that duty by acting negligently. 3. The breach caused injury or loss to the plaintiff. Duty of Care – The Defendant’s Legal Obligation Duty of care is a legal obligation, not a moral one. No legal duty, no negligence: Injury alone does not create liability. Examples: Observing harm without intervention does not establish a duty. Breach of Duty – Failure to Meet the Standard of Care A breach of duty occurs when the defendant fails to meet the standard expected. The standard is based on what a reasonable person would do in similar circumstances. Negligence involves actions or failures to act that fall below this standard. Damages and Proximate Cause in Negligence Proximate cause: Plaintiff must show damages resulted directly from the defendant’s negligence. If no actual damages are suffered, there is no basis for a negligence claim. Actual damages are essential to establish a valid claim in tort. Liability in Statute and Doctrine of Strict Liability Statute law imposes specific obligations on business owners to comply with safety and regulatory standards. Breach of statutory regulations can result in legal liability for business owners. Strict liability: Some activities are so hazardous that liability is assumed regardless of fault. Strict Liability in Common Law Common law assumption: Most activities are safe if conducted with reasonable care. Certain inherently dangerous activities impose strict liability regardless of precautions. In strict liability cases, the defendant is presumed liable without needing to prove negligence. Strict Liability in Statute Law Statute law is a major Federal and provincial Statutory breaches source of strict statutes regulate causing harm can liability, often activities with high lead to both fines imposing fines and risk to public safety. and damages. penalties. Activities Imposing Strict Liability and Limited Defenses Certain high-risk activities automatically impose strict liability on the person conducting them. Examples include Explosives Fires Aircraft operations Dangerous substances Defenses are limited in strict liability cases, though some may apply in specific situations. The Broker and the Law – Identifying Liability Exposures Basic legal knowledge Brokers should Refer clients with specific helps brokers identify recommend insurance legal questions to client liability exposures. but avoid providing legal qualified practitioners. advice.  Analyzing Liability Loss Exposures – Resources for Brokers This chapter provides a general overview of liability exposures. Brokers should seek guidance from senior producers or underwriters for unfamiliar risks. Liability exposures vary widely; thorough analysis is essential. Premises & Operations Liability Exposure Occupiers can be liable for injury or property damage to third parties on their premises. Liability arises from occupancy and activities conducted on the property. Occupier: Defined by control, not ownership; includes owners, tenants, and those with supervisory control. Duty Owed to Visitors – Premises and Operations Occupiers have a legal duty for both the condition of the premises and activities conducted on them. Premises exposure: Liability arises from unsafe conditions on the property. Operations exposure: Liability also extends to activities performed on or off the premises. Premises Exposure – Common Risks and Examples The condition of the premises can lead to claims if it causes harm to visitors. Common hazards include: Loose railings or faulty stairwells. Wet floors or uneven carpets. Poorly maintained sidewalks or exits. Operations Exposure – On and Off-Premises Activities Operations exposure includes risks from business activities, both on-site and off-site. Examples of on-site operational risks: Property damage from a spark during welding. Injury to a customer from a dropped item. Liability is established in common law or statute law. Liability in Common Law – Duty of Care Based on Visitor Status Duty of care in common law A higher duty of care is The level of responsibility varies based on the visitor’s owed to invitees (e.g., reflects the occupier’s purpose. customers) than to obligation to ensure safety trespassers. for lawful visitors.  Occupiers’ Liability Acts replace common law duties with clearly defined statutory obligations. Liability in Statute – These Acts were introduced in the 1970s-1980s in several provinces. Occupiers' Liability Brokers must be aware of provincial differences in these Acts statutes. Common Duty and Exceptions under Occupiers’ Liability Acts Limited Liability of Occupiers – Overview Occupiers’ liability can be limited in specific situations. Independent contractors may assume liability, depending on circumstances. Brokers should understand cases where occupier liability is reduced or eliminated. Liability for Independent Contractors Principals aren’t liable for an independent contractor’s negligence if: Reasonable care was used in selecting the contractor. The contracted work is deemed reasonable to perform. Principals may share liability when: The work is inherently dangerous (e.g., using explosives). Defective equipment provided by the principal causes harm. The principal controls the work process. Liability for Rented Premises – Single Occupancy Landlords in single occupancy buildings generally aren’t liable for tenant or customer injuries. Exceptions to landlord non-liability: Failing to disclose known hazards at lease commencement. Neglecting repair duties after receiving notice from the tenant. Liability for Rented Premises – Multiple Occupancy Duty Owed to Those Outside the Premises Occupiers owe a duty to individuals outside the premises affected by occupancy or operations. Premises should be maintained safely to prevent hazards to passersby. Examples: Signs over public property, loose bricks, or snow and ice hazards. Liability for Nuisance Nuisance: An action that disrupts others’ comfort or use of their property. Plaintiffs must show: Physical injury or significant interference. The interference was unreasonable. Common nuisance examples: Smoke, odors, noise, pollution. Liability for Trespass Trespass: An unlawful interference with another’s property. Examples include: Overhanging buildings encroaching on a neighbor’s land. Dumping waste on someone else’s property. Products Liability Exposure – Consumer Rights and Defective Products Consumers expect safe products; defective products causing harm may lead to liability claims. Products liability exposure applies to anyone selling goods. A product is deemed defective if it: Contains something unintended. Lacks something necessary for safety. Establishing a Products Liability Claim – Requirements and Examples To file a products liability claim, the injury must: Occur away from the seller’s premises. Happen after the seller has relinquished the product. On-premises injuries are premises liability claims, not products liability. Example: Doggy bag from a restaurant causing illness at home. Liability in Contract – Sale of Goods Act and Warranties Sellers of goods may be liable under contract law through The Sale of Goods Act. Implied warranties are included in every sale, covering: Fitness for a particular purpose when the buyer relies on the seller’s expertise. Express warranties (e.g., advertising claims) override implied warranties if specified in the contract. Liability in Contract – Express Warranties and Limitations Advertising claims can Only parties to the contract Consumers generally lack a create express warranties, (the buyer and seller) have contractual claim against leading to liability if claims the right to sue for breach of manufacturers but may sue are misleading. contract. sellers directly. Action in Tort – Extending Liability to All Users Initially, only purchasers could sue manufacturers for product defects. Donoghue v. Stevenson (The Snail in the Bottle Case) expanded rights to all users of defective products. Canadian law recognizes this right, allowing consumers to sue manufacturers for negligence. The Snail in the Bottle Case – Donoghue v. Stevenson (1932) Incident: May Donoghue consumed a ginger beer with a decomposed snail, causing severe illness. Legal issue: Donoghue could not sue under contract law, as she was not the purchaser. Outcome: The House of Lords ruled manufacturers owe a duty of care to end users, establishing a precedent in consumer protection. Burden of Proof – Shifting Responsibility to Manufacturers Traditionally, plaintiffs had to prove manufacturer negligence for product defects. In Canadian courts, the burden often shifts to manufacturers to prove they were not negligent. Manufacturers meet this onus by demonstrating reasonable precautions in production and inspection.  Some provinces enforce strict liability for defective products, Strict Liability regardless of negligence. – Provincial Legislation This legislation responds to increasing product complexity and and hidden dangers. Manufacturer Strict liability laws place greater Responsibility responsibility on manufacturers for consumer safety. Duties of Manufacturers must ensure safe design and manufacturing practices. Manufacturers – Warning obligations: Manufacturers must inform consumers of Ensuring Product potential dangers. Safety and Instructions: If a product requires guidance for safe use, instructions must be provided. Providing Warnings Duties of Sellers – Liability and Consumer Protection Sellers are regarded as experts on their products and are expected to provide accurate information. Misrepresentation: If sellers make false claims, they can be liable for deceit or breach of contract. Both retailers and manufacturers may be held liable, as demonstrated in Grant v. Australian Knitting Mills. Completed Operations Liability Exposure – Overview and When an Operation is Complete Completed operations exposure arises when defective work causes injury or damage after work is finished. Claims may be brought in contract or tort. A completed operation claim applies if: The injury or damage occurs off the premises of the worker. The work has been finished or abandoned. Types of Losses from Completed Operations Defective work may cause: Bodily injury or property damage. Loss of use if the work fails to function as intended. Examples: A failed heating unit may close a business. Improper gas line connection may cause an explosion. Common Claims in Completed Operations Liability Common allegations in completed operations claims include: Improper performance of a task. Use of defective materials or parts. Work not meeting warranty promises. Businesses must withdraw or repair known defective work to avoid liability. Personal Injury Liability Exposure Liability for Property in Care, Custody, or Control – Overview Businesses may be liable for property of others in their care, custody, or control. Real property: Liability often applies to rented premises or fixed equipment. Personal property: Applies to temporary custody situations, such as bailment for hire. Liability for Real Property – Rented Premises Businesses operating on rented premises may be liable for damage to the building or fixed equipment. Lease agreements often define the extent of tenant liability. In the absence of a contract, common law determines liability based on tort principles. Liability for Personal Property – Bailee for Hire Bailee for hire: Temporary custodian of another’s property, typically compensated. Liability in tort: Bailees must exercise ordinary care based on the property type. Liability in contract: Agreements specify bailee responsibilities but tort law may expand obligations. Employer’s Liability for Torts of Employees Employers are liable for Liability applies even if the Exceptions: Employers aren’t employee torts committed wrongful act was liable when employees: during employment. unauthorized by the employer. Act outside their duties (e.g., personal "frolic"). Delegate duties without consent. Use employer property for personal reasons. Employer’s Liability for Injuries to Employees – Workers’ Compensation Workers' Compensation laws provide no-fault benefits for workplace injuries. Employees covered by Workers' Compensation waive the right to sue employers. Excluded occupations may sue employers if injured; examples (vary by province): Farming, commercial fishing, clergy, and foreign embassies. Contingent Liability – Work by Non- Employees CONTINGENT LIABILITY ARISES WHEN SUBCONTRACTOR EXAMPLE: LIABILITY PRINCIPALS MAY STILL FACE LEGAL WORK IS PERFORMED BY NON- TYPICALLY FALLS ON SUBCONTRACTORS, COSTS IN DEFENDING AGAINST CLAIMS EMPLOYEES. NOT THE PRINCIPAL. INVOLVING SUBCONTRACTORS. Contingent Liability – Employees Working Out of Province Contingent liability may arise if employees work out of province beyond Workers' Compensation coverage. If injured, employees may sue the employer for damages, as Workers' Compensation won’t respond. Brokers should advise clients to monitor coverage limits for out-of-province work. Contractual Liability Exposure Contractual liability: Liability assumed by a business under contract terms. Common contracts with liability assumptions include: Construction contracts: Contractors often assume liability for work-related risks. Purchase orders/sales agreements: Liability transfer clauses may protect manufacturers or retailers. Lease/rental agreements: Tenants may assume liability beyond just negligence. Automobile and Aircraft Liability Exposure Automobile liability: Common exposure for businesses using owned or non-owned vehicles. Aircraft and watercraft liability: Less common but significant for businesses with owned or non-owned vessels. Brokers should assess both automobile and aircraft/watercraft exposures during risk evaluation. Pollution Liability Exposure Pollution: Contaminating or harming the environment, often through business waste. High-risk industries: Chemical plants, pulp mills, gas stations, meat processing. Environmental legislation imposes strict clean-up requirements and can lead to criminal charges. Clean-up costs: Significant financial burden; not limited to large industries. Incidental Medical Malpractice Exposure Incidental medical malpractice: Liability exposure from providing medical services as part of business operations. Common in businesses with on-site first aid stations (e.g., meat processing, manufacturing). Potential claims may arise from improper or omitted medical care. Checkpoint Challenge Questions?