Intentional Torts, Strict Liability, and Remedies for Torts: Practice Questions and Solutions

This section of the study guide is intended to provide practice problems and solutions to accompany the pages of Foundations of Risk Management and Insurance, cited below. Students are encouraged to read these pages before attempting the problems. This study guide is entirely an independent effort by Mr. Stolyarov and is not affiliated with any organization(s) to whose textbooks it refers, nor does it represent such organization(s).

Some of the questions here ask for short written answers based on the reading. This is meant to give the student practice in answering questions of the format that will appear on Exam 5. Students are encouraged to type their own answers first and then to compare these answers with the solutions given here. Please note that the solutions provided here are not necessarily the only possible ones.

Source:

Nyce, C.M. Foundations of Risk Management and Insurance (Second Edition). 2006. American Institute for Chartered Property Casualty Underwriters. Chapter 9, pp. 9.3-9.11.

Original Problems and Solutions from The Actuary's Free Study Guide

Problem S5-26-1. Which of the following statements about intentional torts and strict liability are true? More than one answer may be correct.

(a) One example of an ultrahazardous activity is keeping domesticated animals known to be unusually dangerous.
(b) Most insurance policies exclude coverage for intentional torts.
(c) Engaging in ultrahazardous activities that result in injury to others will not result in liability to others, provided that the entity engaging in the activities can show that it exercised due care in preventing injury.
(d) Battery is considered a physical tort.
(e) Defamation (e.g., libel and slander) is considered a physical tort.
(f) False arrest is considered a physical tort.
(g) Selling dangerously defective products can result in strict liability.

Solution S5-26-1. This question is based on the discussion in Nyce 2006, pp. 9.8-9.9. The following answers are correct:
(a) One example of an ultrahazardous activity is keeping domesticated animals known to be unusually dangerous.
(b) Most insurance policies exclude coverage for intentional torts.

(d) Battery is considered a physical tort.

(f) False arrest is considered a physical tort.

(g) Selling dangerously defective products can result in strict liability.

Choice (c) is not correct, because engaging in ultrahazardous activities can result in strict liability, where the damage itself is sufficient to cause liability - irrespective of the care taken by the party performing the action.

Choice (e) is not correct, because defamation is considered a nonphysical tort. Defaming someone does not involve the infliction of physical harm.

Problem S5-26-2. Which of the following statements about remedies for torts are true? More than one answer may be correct.
(a) General damages are subdivided into the categories of compensatory damages and punitive damages.
(b) Compensatory damages are subdivided into the categories of general damages and special damages.
(c) Punitive damages are a subset of compensatory damages.
(d) Punitive damages are not required to have a relationship to the actual harm suffered by an injured party.
(e) Pain and suffering damages are an example of general damages.
(f) Mental anguish damages are an example of special damages.
(g) Medical expenses incurred by the plaintiff are an example of special damages.

Solution S5-26-2. This question is based on the discussion in Nyce 2006, pp. 9.10.

The following answers are correct:
(b) Compensatory damages are subdivided into the categories of general damages and special damages.

(d) Punitive damages are not required to have a relationship to the actual harm suffered by an injured party.

(e) Pain and suffering damages are an example of general damages.

(g) Medical expenses incurred by the plaintiff are an example of special damages.

Choice (a) is not correct, because general damages are a subset of compensatory damages, and punitive damages are apart from compensatory damages.

Choice (c) is not correct, because punitive damages are imposed apart from compensatory damages to punish a defendant for conduct that is malicious, reckless, or deceitful.

Choice (f) is not correct, because mental anguish damages are an example of general damages.

Problem S5-26-3. Mr. Θ is the plaintiff in a lawsuit against Mr. Ψ, who has been accused of dumping ravenous piranhas into a stream which passes through Mr. Θ's property. The two neighbors are on good terms, and it is clear that Mr. Ψ did not intend to cause harm; he simply wanted to get rid of the piranhas. In order to maintain good terms with Mr. Ψ, Mr. Θ does not want to make Mr. Ψ pay anything in monetary damages. What other resolution to this lawsuit might be acceptable to Mr. Θ? (See Nyce 2006, p. 9.11 for a discussion of a possibility.)

Solution S5-26-3. Mr. Θ could ask the court to order an injunction against Mr. Ψ to prevent Mr. Ψ from dumping piranhas into any body of water that passes through Mr. Θ's property. An injunction, according to Nyce 2006, p. 9.11, is "a court-ordered equitable remedy requiring a party to act or to refrain from acting." In this case, Mr. Θ will probably be satisfied with just the injunction and no other remedies for Mr. Ψ's tort.

Problem S5-26-4. Which of the following statements about remedies for torts are true? More than one answer may be correct.

(a) In some cases, states' tort reform statutes may limit the amount of special damages a plaintiff can receive.
(b) In some cases, states' tort reform statutes may limit the amount of general damages a plaintiff can receive.
(c) Punitive damages are most often awarded in ordinary negligence lawsuits.
(d) Recently, the frequency and severity of punitive damages have considerably increased.
(e) General damages are awarded to compensate victims for tangible losses that can have a clear, objective economic value associated with them.
(f) Loss of earnings from damaged property would constitute a kind of special damages.

Solution S5-26-4. The following answers are correct:
(b) In some cases, states' tort reform statutes may limit the amount of general damages a plaintiff can receive.

(d) Recently, the frequency and severity of punitive damages have considerably increased.

(f) Loss of earnings from damaged property would constitute a kind of special damages.

Choice (a) is not correct; tort reform statutes limit general damages, not special damages.

Choice (c) is not correct; punitive damages are most often awarded in cases in gross negligence, intentional interference, or particularly malicious conduct.

Choice (e) is not correct; general damages are awarded to compensate victims for intangible losses that do not have an easily ascertainable economic value.

Problem S5-26-5. A demolition company used dynamite to demolish a building. The resulting explosion, however, damaged Mr. Π's nearby store so as to take it out of operation, resulting in considerable uncertainty regarding the Π family's financial situation. The explosion also resulted in a loss of a limb to Mr. Π's wife. Give three examples of special damages and three examples of general damages which the demolition company might be required to pay to the Π family.

Solution S5-26-5. The following are three possible examples of special damages:
1. Medical expenses incurred by Mr. Π's wife;

2. Damage to the property owed by Mr. Π (i.e., the store);

3. Damages resulting from loss of earnings because Mr. Π's store was damaged.

The following are three possible examples of general damages:

1. Damages for pain and suffering experienced by Mr. Π's wife;

2. Damages to Mr. Π for loss of consortium with his wife, as a result of her disability;

3. Damages for mental anguish due to the uncertainty of the Π family's financial condition after the explosion.

(Categories of examples of general and special damages can be found in Nyce 2006, p. 9.10.)

See other sections of The Actuary's Free Study Guide for Exam 5.