UserBusiness Law in CanadaTwelfth EditionChapter $5$Negligence, Professional Liability, and Insurance$(1$ of $3)$When you complete Chapter $5,$ you should be able to:$1.$Identify the four elements of a negligence claim$2.$State when a duty of care arises, how it is breached and identify the tests used to determine if a duty is owed or a breach has occurred$3.$Explain how both physical and legal causation are proven$(2$of $3)4.$Distinguish the defences applicable to the tort of negligence$5.$Distinguish occupiers liability, innkeepers liability, strict liability, vicarious liability, and product liability$6.$Describe the circumstances where professional liability may arise$(3$of $3)7.$Describe four types of insurance businesses commonly need$8.$Identify when an insurable interest exists$9.$Explain the significance of insurance being a contract of utmost good faith$10.$Examine the duties imposed by law on the insured and insurer Negligence $(1$ of $2)$Inadvertent or unintentional careless conduct that causes injury or damage to another person or their propertyAll four required elements must all be established to succeed in a negligence action:A duty of careBreach of dutyCausationDamageNegligence $(2$ of $2)$Table $5\mathrm{.}1$ Negligence: The Required IngredientsIngredientsWhat Needs to Be EstablishedTests UsedA A duty of care is owed to the plaintiffThat the proximity of the parties created an obligation to exercise caution or care$1.$Foreseeable plaintiff test $($reasonable foreseeability test$)2.$Policy considerationsmay negate existence of a dutyB Breach of that duty; breach of the standard of careThat the defendant was not careful enoughReasonable person testC Causation$1.$That the defendant directly or physically caused the injury; and$2.$That the injury was reasonably foreseeable$1.$ Physical: but for test $2.$ Legal: remoteness testD DamageThat the plaintiff suffered injury or lossRefer to precedentshas this type of loss been recognized by courts as compensable?A: A Duty to Exercise Care Must Exist $(1$ of $2)$We owe a duty to anyone we can reasonably anticipate might be harmed by our conductReasonable Foreseeability Test: If it would be apparent to a prudent person that the conduct was likely to cause injury, a duty is owedA: A Duty to Exercise Care Must Exist $(2$ of $2)$Anns case: created a two$-$stage test for determining the existence of a duty of care $1.$Foreseeable injury and proximity$2.$Provides for exceptions or modifications to the primary test for policy reasonsUsed in new situations or classes of cases where a duty of care has not already been establishedMisfeasance and NonfeasanceMisfeasanceAn act that causes harm to another $($wrongdoing$)$Court will provide remedyNonfeasanceA failure to prevent an injuryCourts reluctant to provide remedy B: Breach of the Standard of Care $(1$ of $2)$Once the existence of a duty is established the second issue is whether the defendant demonstrated sufficient careReasonable person test: What would a reasonably prudent person, in possession of all the facts of the case, have done in this situation?Reasonable care, not perfection, is requiredReasonable conduct varies with circumstancesRisk of injury affects standard, as does costB: Breach of the Standard of Care $(2$ of $2)$Reasonable conduct varies with:Expertise of person being suedStandard of care does not diminish in the case of an elderly personExpectations for children are lowerActions that fall below socially acceptable standards create liability for damages It is not always necessary to show lack of careCircumstantial evidence may establish a prima facie caseC and D: Causation and DamagesNegligence requires a loss to person or propertyNo injuryno negligence claimIn the past, there had to be some actual physical damage but the court now recognizes economic and mental injuryBut For Test: Physical CausationDamage must be a direct result of the careless conduct But for test: but for the conduct of the plaintiff, no injury would have resulted $($causation$)$Remoteness Test Legal CausationRemoteness test: Whether the specific type of injury suffered was reasonably foreseeableRemoteness may arise twice in a negligence action Proximity of the parties $($Duty of Care$)$As a factor in causation $($Causation$)$Thin skull rule: We take our victims as we find them $($one is liable for the full extent of injuries suffered$)$Crumbling skull rule $(1$ of $3)$Three defences to a negligence claim:$1.$Voluntary assumption of risk $($Volenti non fit injuria$)$:The law will not assist those who volunteer to bear riskThe defendant must show that the plaintiff assumed the physical risk and the legal risk A successful claim of volenti is rare today$(2$of $3)2.$Contributory negligence:Courts apportion the loss between the parties Last clear chance doctrine names one party completely responsible; not often used nowProvincial statutes now allow court to apportion responsibility among plaintiff and defendantsDuty is owed to rescuersIf potential danger was reasonably foreseeable, so was potential need for rescue$(3$of $3)3.$Illegality $($ex turpi causa$)$:Courts will not hear a lawsuit brought by a party engaged in unlawful activityIllegal conduct must cause loss to the plaintiff before the defence will operate Justification is preservation of the integrity of the legal systemRarely successful Legislation Impacting Duty of CareStatutes may impose obligations to exercise care not found in common lawStatutes do not usually create new categories of tortTrend away from fault No$-$fault insuranceMonetary ceiling for claimsStatutes may create a duty of careOccupiers Liability $(1$ of $2)$In common law, an occupier of property $($not the owner$)$ owes a duty to people who come onto the property as visitorsOccupiers must take reasonable steps to protect all classes of visitors to their property An occupier cannot do anything wilful or reckless to harm a trespasserDuty of care is higher if they are childrenOccupiers Liability $(2$ of $2)$Legislation imposes and describes duty of care and extends it to:$1.$The condition of the premises$2.$The activities on the premises, or$3.$The conduct of third parties on the premisesAlcohol Liability is established for commercial establishments and businesses supplying liquor to employees at company activities; may be imposed on social hosts in the futureQuestion for Discussion $(1$ of $2)$ The courts have found commercial establishments liable for injuries sustained by their guests when they have consumed alcohol on their premises. Do you think the courts have gone too far in assessing this kind of liability?Innkeepers LiabilityDuty of Innkeepers to safeguard guests from wrongful acts of othersHistorically, innkeeper responsible unless loss to a guests property was caused by that guests own negligenceStatutes have modified in most jurisdictionsStrict LiabilityLiability when there is no faultWhen a dangerous situation is created by an unusual use of property which is inherently dangerous, the owner$/$occupier is liable for all damages when it escapes Vicarious liability is a form of strict liability Employer being held responsible for the wrongful acts of an employee even though the employer has done nothing wrongProduct Liability $(1$ of $2)$Manufactured products are often dangerous because of:Some inherent defect, orTheir nature, such as in the case of chemicals, tools, or explosivesManufacturers are liable for injuries caused by defective productsNecessary to establish that there was a duty to be careful, and to prove that there was a failure to live up to that dutyProduct Liability $(2$ of $2)$Plaintiff must establish that the manufacturer was negligent But breach of manufacturers duty can be implied from circumstances reverses onusIntermediate inspection by a third party may absolve manufacturer from liabilityWarnings about defects by the manufacturer must be sufficiently adequateCircumstantial evidence can be used to prove breach of dutyLiability of Professionals and Other ExpertsProfessionals belong to professional organizations and practice in a specific area of service Professional liability and insurance costs are important aspects of business Liability is:Often set out in contractRelated to tort law, especially negligenceBased on fiduciary dutyContractsIf professionals provide sub$-$standard service they are liable for the losses resulting from the breach of the contract Standard of service is normally implied Professionals implicitly provide reasonable level of performance given claimed expertiseOften professionals attempt to limit that liability with disclaimersLiability is restricted to contracting partiesNegligent MisstatementNegligent conduct and negligent words are both actionablePeople who suffer economic loss because of a professionals negligent statements may recover damages Reasonable foreseeability test determining duty is owed was deemed to be too broad $($Anns test$)$ Courts now use reasonable reliance test to determine existence of a dutyBreach of Standard of Care Professionals and experts held to a high standardRequire skills and abilities expected of a reasonable professional in that fieldInexperience does not excuse incompetenceCommon practice that is dangerous or careless is not an excuseFiduciary Duty and Breach of Trust A professional or expert, must:Act with loyalty and good faithNot act against the interests of clients or former clients without permissionNot use confidential information for own benefitDisclose pertinent informationUse extreme care with funds entrusted to them $($breach of trust$)$Professional InsuranceOften a condition of practice for professionalsProtects against damages resulting from errors and omissionsPremiums can be a significant business expense and have been rising due to increased number of claimsMay cover legal costs when a professional is suedDoes not cover fraud or breach of trustInsurancePurpose: to reduce the cost of loss by spreading the risk Insurance transfers the risk from the insured to the insurer Premiums increase with the amount of risk involvedTightly regulated Federal and provincial legislationThe Insurance IndustryInsurance agent has a duty to insurance companyInsurance broker is an independent businessBoth agents and broker also have duty of good faith to customerInsurance adjuster investigates and negotiates on behalf of insurance companies$1.$ Liability InsuranceCovers damage caused by negligence of self or employeesDoes not cover wilful actsApplies only when insured is at faultTakes many formsProfessional liability insuranceUmbrella liability$2.$ Property InsurancePropertyCovers losses to buildings and their contents due to fire or other named perils Comprehensive covers everything except what is specifically excludedCoverage should correspond to actual value of the propertyCo$-$insurer or deductible$3.$ Business Interruption InsuranceFor an unforeseen event that causes a business to cease operation for a timeCovers lost profits and expenses of bringing business back into operationPuts insured in same financial position as if the loss had not occurred$4.$ Life and Health InsuranceLifeProvides for dependants and$/$or Business associates $($key person$)$After death of insuredHealthMedical: covers health care expensesDisability: provides income for disabled workerOverlapping extended benefitsBondingLiability insurance does not cover wilful acts such as assault or theftBonding offers some protection against losses brought on by employees who may act wrongfullyFidelity bondEmployee becomes liable to bonding companySurety bond Pays compensation if a job is not completed, or completed on timeInsurable InterestInsured must have personal stake or interest in whatever is being insured, or insurance contract is voidCan only claim on the insurance to the extent of the value of that interestLegislation may determine in whose life one has an insurable interest When the payout becomes a windfall, the insurance agreement is void as an illegal contractLimitation Clauses $($Exclusion Clauses$)$Insurance contracts take a standard fixed form and often contain limitation clauses favouring the insurerContra Preferentum ruleContract ambiguities are interpreted to favour the party that did not draft the contractCoverage broadly construedExclusions narrowly construedContract of Utmost Good FaithDuty of insured:Must disclose pertinent information and changes in pertinent informationAffects risk and insurance ratesDuty of Insurers:To process claims fairlyArrange legal representation and a defence for the insured SubrogationOnce an insurer has paid out on a claim, they can step into the shoes of the insuredInsurer sues in the name of the insured the person who caused the lossRight of salvageInsurers right to sell damaged or recovered goods The insured is not permitted to profit from their wilful misconductQuestion for Discussion $(2$ of $2)$ An insurance policy is a contract of utmost good faith. What do you think the public policy is of allowing insurance companies not to pay out on a loss when the insured has not provided proper disclosure?Catori has worked for lawyer Larry for the last five years in his home office. Since the economic downturn, some of Larrys clients have gone out of business and Larrys law practice has also suffered. Larry has told Catori that if business does not pick up$,$ he would have to reduce her work hours. Catori had taken some online courses in accounting and in her spare time she has been studying the books to see how she can make the numbers look better. She inflated some billings and expensed some of Larrys personal bills through the firm accounts.Larry and Catori began attending more functions to meet new potential clients. Catori finds herself drinking and hobnobbing harder than ever before, sometimes staying on at the events even after Larry has left. One raw rainy evening just before Christmas, after several drinks, Catori found herself one of the last to leave a party at the golf club. As she was getting her coat, she found herself in the empty cloak room where Chirag, one of the potential clients she was talking to during the evening, told her that she looked ravishing and offered to help her with her coat. What transpired afterwards would be described as inappropriate touching and some kissing. Catori broke loose and ran to her car. Fumbling for her keys, she did not realize that she had dropped her smartphone in the parking lot. Understandably upset, she drove away hastily and, coming around a turn too fast down the dark country road, crashed into a guardrail and passed out. A few minutes later, Meaghan and her one$-$year old son, Sam, were driving to pick up her husband $($yes$,$ that same two$-$timing Chirag$)$ from the Christmas party. Coming around the same turn, Meaghan did not see Catoris stalled car and slammed into it$.$ Sam was not properly secured to his car seat and was seriously injured. In all the turmoil over the past few weeks, Catori had forgotten to renew her car insurance.Meanwhile, Catoris smartphone was picked up by Chirag. Feeling rebuffed by Catori, he posted some personal, confidential, and proprietary information of Larrys clients from the smartphone on his website.Who might be liable for what, and why?expalin this with examples