Business Law In canada 11th Edition By Yates -Test Bank

Business Law In canada 11th Edition By Yates -Test Bank

 

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Sample Questions Are Posted Below

 

Business Law in Canada, 11e (Yates)

Chapter 5   Negligence, Professional Liability, and Insurance

 

1) A seven-year-old boy followed his dog into Mr. Howe’s backyard. He fell into a large hole dug by Mr. Howe in preparation for a tree that had been ordered. The boy broke his arm in the fall. At the hospital, the boy was treated by a doctor who had been employed there for four years. The doctor did not set the boy’s arm because he made a mistake in reading the x-ray. Because the arm was not treated correctly, it healed improperly. When the boy kept complaining, his mother took him to their family doctor, who discovered the error. The boy had to have his arm rebroken so that it could be set properly. Based on these facts, which of the following is true?

1. A) The owner of the land owed no duty of care to the boy because the boy was a trespasser.
2. B) The case law that developed over hundreds of years on the duty of care owed by occupiers of land has priority over any subsequent legislation on the point.
3. C) The doctor owed a duty of care to the boy, but he only had to meet the standard of care expected of the average man.
4. D) The hospital, not the doctor, would be solely liable for any harm suffered due to the negligence.
5. E) In an action against the land owner, if the boy were found to be partially at fault for his injury, the court would apportion the award of damages as it apportioned the fault.

Answer:  E

Diff: 3      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 1. Identify the four elements of a negligence claim.

Bloom’s Taxonomy:  Knowledge

 

2) Which of the following situations could not result in a successful action for negligence?

1. A) When Todd was setting up a tent for a backyard wedding, he fell into a hole and broke his leg. The owner forgot to tell the wedding planner that he had been digging a hole to put in a fish pond.
2. B) An employee of the bank mistakenly wrote to Maria saying that the bank had approved her loan. Relying on that letter, Maria made contracts she could not honour when the bank refused to forward the money. Maria lost $10,000 because of the bank’s carelessness.
3. C) A driver, trying to see what a movie crew was doing, accidentally plowed his car into the side of a catering truck.
4. D) Nikki almost upset a glass table and broke an expensive vase when she yanked on a large cable without checking what was blocking its path.
5. E) A real estate agent, fed up with his client, punches him in the nose when he changes his mind about selling his condo.

Answer:  D

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 1. Identify the four elements of a negligence claim.

Bloom’s Taxonomy:  Knowledge

 

3) Two real estate agents, pressed for time, stopped at the bakery for some muffins that would suffice as lunch. John bought the muffins and gave one to Mary. They both began to eat the muffins as they hurried to the car. When Mary looked at the muffin she had just bitten, she saw that the raisins had little worms in them. John’s muffins were the same—with little worms. Based on these facts, which of the following possibilities is true? (Read each independently from the others.)

1. A) Since Mary did not buy the muffins, she could not sue in contract, but if she were injured, she could sue in tort.
2. B) Even if Mary was not injured by eating the worms, she could sue the baker of the muffins for nuisance.
3. C) If Mary sued the baker of the muffins or the packer of the raisins, she would have to prove only one thing to win her case—that there were worms in the muffin.
4. D) Mary has a cause of action against the baker of the muffins only if she can prove that the baker used bad raisins on purpose.
5. E) Mary can do nothing since she did not purchase the muffins.

Answer:  A

Diff: 3      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 1. Identify the four elements of a negligence claim.

Bloom’s Taxonomy:  Knowledge

 

4) Which of the following situations could result in a successful action for negligence?

1. A) George deliberately broke an expensive camera when he yanked on a large cable.
2. B) When Eric was setting up the lighting in a backyard rented for a night shoot, he fell into a hole and broke his leg. The owner had previously notified the director that he had been digging a hole to plant an apple tree.
3. C) An employee of the bank mistakenly wrote to Sean saying that the bank had approved his loan. Relying on that letter, Sean made contracts he could not honour when the bank refused to forward the money. Sean lost $100,000 because of the bank’s carelessness.
4. D) A doctor, acting in the best interest of his patient Alex (who had lost blood after a serious cut), gave him a transfusion even though Alex told him explicitly not to do so.
5. E) Dr. Jones used the skill of a reasonable doctor in his field, but the patient did not respond to the treatment and lost sight in one eye. The patient sued the doctor.

Answer:  C

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

5) Sam and John drank beer and watched the Olympics for hours. When John left, he did not feel impaired, but the alcohol in his system affected his driving. He lost control of his car, which crashed through Mr. Mitsu’s fence and into Mr. Mitsu’s garage. Mitsu’s neighbour, Mr. Watson, called the police. John was charged with driving while impaired and was found guilty in the criminal proceedings. Given these facts, which of the following is true?

1. A) Mr. Watson, the neighbour, could sue John for negligence.
2. B) Mr. Mitsu could sue John for negligence.
3. C) If Mr. Mitsu sued John, he would be entitled only to punitive damages.
4. D) Because John was charged with an offence, Mr. Mitsu cannot sue him in a civil action for compensation. One court action is all that is allowed.
5. E) Since no one was physically injured, there could be no civil action.

Answer:  B

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

6) In which of the following cases is a legal duty not owed?

1. A) A person undertakes to rescue someone in danger
2. B) It would be apparent to a prudent person that the conduct was likely to cause injury
3. C) A person making a misstatement knew that it would be relied on by a member of a group
4. D) A visitor comes on your property
5. E) A person sees another in desperate need of assistance

Answer:  E

Diff: 1      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

 

7) Which of the following statements with regard to the tort of negligence is false?

1. A) If a person is injured by a defective product that he himself did not purchase, he can sue the manufacturer for negligence.
2. B) If the court finds contributory negligence, the defendant has no liability at all.
3. C) If physical injury can be foreseen as the result of a person’s negligence, the wrongdoer will be liable for all the injury suffered although the person injured was unusually weak and infirm.
4. D) A possible defence to the plaintiff’s claim of negligence is that the plaintiff volunteered to take the risk.
5. E) The test used to determine whether a duty of care is owed is this: would a reasonable person foresee that the plaintiff could be affected by the acts of the defendant?

Answer:  B

Diff: 1      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

8) Because of the North American Free Trade Agreement and increasing world competition, a provincial government decided to help businesses by providing more information about market conditions, currencies, etc., around the world. It opened small offices throughout the province that provided business information retrieved from the government’s database, which was frequently updated. Mr. Hill relied on some information given to him by Alex Chec, an employee of the government. The information was wrong due to Chec’s mistake; it was his job to cross-check that information before it was released to the public, but he forgot to do it. Mr. Hill suffered a $15,000 loss because of the error. Which of the following is true?

1. A) Mr. Hill cannot take any action because he suffered no physical injury. The case only deals with information.
2. B) If Mr. Hill sues the government on the principle of vicarious liability, he cannot also sue the employee at fault.
3. C) On these facts, Mr. Hill could sue successfully on the principle of strict liability.
4. D) Mr. Hill could not take any action because he had not entered into a contract with the government for this information.
5. E) To win in an action against the government, Hill must prove that the government owed him a duty of care, fell below the standard of care owed, and thereby caused him a foreseeable loss.

Answer:  E

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

 

9) Which of the following statements best describes the standard used by the courts to measure socially acceptable behaviour?

1. A) An average person acting normally
2. B) A careful person acting to the best of his ability
3. C) A reasonably prudent person acting in a careful manner
4. D) The best possible response to the circumstance
5. E) When you cause injury, you are always liable.

Answer:  C

Diff: 1      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

10) In which of the following would the plaintiff not succeed in an action for negligence?

1. A) A zoning officer carelessly told Mr. Lee that the lot was zoned “commercial,” but it was really zoned “duplex.” Lee lost $85,000 by relying on this information.
2. B) An accounting firm made a mistake in the audited financial statements, which caused an investor to lose $20,000. The firm knew the investor was going to rely on the statements to invest.
3. C) May was made sick by drinking a contaminated cola, bottled by Black, bought for her by her friend Fred from Green.
4. D) Dr. Zotsky used the skill of a reasonable doctor in his field, but his patient did not respond to the treatment and lost sight in one eye.
5. E) Nick was a willing passenger when Alex was driving at 140 km/h. He was hurt when the car slid on wet pavement and crashed. The court found Nick took the physical risk, but never took the legal risk.

Answer:  D

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

 

11) The director of the children’s zoo, Mr. Watson, was appalled to see an employee, Jake, throwing a pitchfork like a javelin in an area where there were both animals and children. Luckily, no one was hurt. He yelled to Jake to get busy and feed the birds so that the birds would come closer to the children. Jake opened a new sealed bag of feed and threw some to the birds. It happened that the manufacturer of the feed, ordered by Watson, had accidentally mixed some caustic substance with the feed, so that later in the day Jake’s hand began to blister badly. Jake sued Watson for negligence because of the burns he suffered; Watson sued Jake for negligence because of the way Jake used the pitchfork. On these facts, which of the following is true?

1. A) Jake will be found liable for negligence because he was careless with the pitchfork; a reasonable person would not have done what he did.
2. B) The test the court will apply to determine whether or not Jake owed a duty of care is this: would a reasonable person foresee that his acts could affect the animals and children?
3. C) Watson owed Jake a duty of care and Watson will, therefore, be liable for negligence.
4. D) Children attending a zoo are voluntarily assuming any risk.
5. E) Jake could not sue the manufacturer because he did not buy the feed.

Answer:  B

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

12) Al bought a case of beer because his friends were coming over to watch the Grey Cup game. During the game, Al opened a beer, poured about a third of it into Bob’s glass, and handed the can to Chuck. Bob noticed the strange orange colour of the beer and called everyone’s attention to it; unfortunately, Chuck had drunk most of the beer from the can before he heard Bob. There had been a small battery in the can that contaminated the beer. Chuck was seriously injured. On these facts, which of the following is true?

1. A) Since Chuck did not buy the beer, he has no cause of action against anyone.
2. B) Chuck could sue Al successfully for negligence because Al handed the contaminated beer to Chuck.
3. C) Bob could sue Al successfully for negligence because Al poured the contaminated beer in Bob’s glass.
4. D) Because Chuck did not buy the beer, he could not sue the seller for breach of contract, but he could sue the beer manufacturer in tort.
5. E) Bob could successfully sue the manufacturer for negligence because he need only prove that the manufacturer owed him a duty of care and need not prove damages.

Answer:  D

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

 

13) The provincial government thought that the only way to make businesses competitive with those from other countries was to make more information available to them about market conditions, currencies, etc., around the world. It began a program of incentives that included a government office that would give people not only the business information but also advice on how the businesses could link up to the government’s database that held the updated information. Mr. Su relied on some information given to him by Alex Chec, an employee of the government. The information was wrong due to a mistake made by an operator entering data. It was Mr. Chec’s job to cross-check that information before it was released to the public. He forgot to do it. Mr. Su suffered a $100,000 loss because of the error. Which of the following is true?

1. A) If Mr. Su sues the government on the principle of vicarious liability, he cannot also sue the employee, or employees, at fault.
2. B) Mr. Su could not take any action because he suffered no physical injury. The case only deals with information.
3. C) The court must find only one party liable and that party must pay for all of the damages.
4. D) Mr. Su could not take any action because he had not entered into a contract with the government for this information.
5. E) The operator may be found liable for negligence if Su, the plaintiff, can prove, among other things, that he owed him a duty of care.

Answer:  E

Diff: 3      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

14) As a result of careless driving, Mr. Boz accidentally knocked Mr. Alder, a seventy-year-old man, off his bike. Mr. Alder broke his arm and collar bone. Because of a rare disease, there was little likelihood that the breaks would heal properly, if at all. In effect, unlike most who would suffer those breaks, he lost the use of his right arm. Mr. Alder sued Boz for negligence. The court held Boz liable. With regard to the question of the amount of damages to be paid by the defendant, which of the following is correct?

1. A) It should be an amount to cover the full extent of the injury suffered.
2. B) It should be an amount to cover the extent of injury that would have been suffered by a reasonable man.
3. C) It should be an amount to cover the extent of injury that would have been suffered by the average man.
4. D) In should be an amount to cover the extent of injury that would have been suffered by the average seventy-year-old man, because a reasonable man would not have foreseen the extent of injury actually suffered.
5. E) It should be no compensation at all because of Mr. Alder’s rare condition.

Answer:  A

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

15) Which of the following is true with respect to the law of tort?

1. A) With assault and battery, a person can successfully sue only if they can prove damages.
2. B) A negligent person causing physical injury to another is responsible to the full extent of the injury suffered even though the injured person suffered more than would reasonably be expected because of a special weakness.
3. C) A person will always succeed with the defence of self-defence even if he used excessive force.
4. D) A customer battered by an employee on the job can sue only the employee, not the employer, because it was the employee who did the wrong.
5. E) For fair comment to be an effective legal defence to a claim of defamation, the person making the comment must have been made in Parliament or court.

Answer:  B

Diff: 2      Type: MC      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

16) You and your friend recently bought a duplex. You rent out the downstairs and live in the upstairs suite. As the owner and occupier, you have acquired certain rights and responsibilities. Which of the following statements about the law relating to land is true?

1. A) You could sue for the tort of negligence if someone used his property in such a way that it interfered with your use and enjoyment of your property.
2. B) The use of your property is partly governed by the Personal Property Securities Act.
3. C) If you bring something onto your property that is inherently dangerous and it escapes causing damage to others, you will be liable even if you were very careful and did not intend to harm anyone.
4. D) If there were an accident out front and a car was knocked onto your yard, you could sue the driver in that car for trespass.
5. E) Your tenants have no duty to take reasonable steps to make sure that any person is reasonably safe when in their suite.

Answer:  C

Diff: 2      Type: MC      Page Ref: 155

Topic:  Ch. 5 – Occupiers’ Liability

Skill:  Applied

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

17) Creative Farming Ltd. manufactures fertilizer from organic matter, a by-product of which is explosive methane gas. During the processing, some of this gas escaped and drifted onto the adjacent property, where it caused an explosion and extensively damaged a building owned by XYZ Co. Creative Farming Ltd. would be liable for the loss under which one of the following principles?

1. A) Strict liability
2. B) Vicarious liability
3. C) Product liability
4. D) Occupiers’ Liability Act
5. E) Contributory negligence

Answer:  A

Diff: 1      Type: MC      Page Ref: 157

Topic:  Ch. 5 – Strict Liability

Skill:  Applied

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

18) In Hall v. Hebert, an individual was severely injured when he allowed his intoxicated friend to drive his car. The Supreme Court of Canada had to deal with whether volenti non fit injuria would apply. What did the Court hold?

1. A) The plaintiff assumed neither the physical risk nor the legal risk in the circumstances.
2. B) The plaintiff assumed only the legal risk, but this is all that is required for volenti non fit injuria to apply.
3. C) The plaintiff assumed only the physical risk, but this is all that is required for volenti non fit injuria to apply.
4. D) The plaintiff assumed the physical risk, but there was no indication he had assumed the legal risk as well.
5. E) The plaintiff assumed the legal risk, but there was no indication he had assumed the physical risk as well.

Answer:  D

Diff: 3      Type: MC      Page Ref: 154

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

19) Which of the following statements with regard to the tort of negligence is true?

1. A) If a person is injured by a defective product that he himself did not purchase, he cannot sue the manufacturer for negligence.
2. B) If the court finds contributory negligence, the defendant has no liability at all.
3. C) If physical injury can be foreseen as the result of a person’s actions, the wrongdoer will be not be liable for all the injury suffered.
4. D) A possible defence to the plaintiff’s claim of negligence is that the plaintiff volunteered to take the risk.
5. E) The test used to determine whether a duty of care is owed is this: would a below-average person foresee that the plaintiff could be affected by the acts of the defendant?

Answer:  D

Diff: 2      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

 

20) Raheel wants to sue a manufacturer who he believes was careless during the manufacturing process. What do the courts do to make this easier on people like Raheel?

1. A) The courts are willing to imply a rebuttable presumption of breach of duty from the circumstantial evidence of the injury or loss.
2. B) The courts are willing to award legal costs to plaintiffs who bring forward these claims, regardless of their success at trial.
3. C) The courts are willing to waive the usual rules of evidence in the favour of the plaintiff.
4. D) The courts are willing to construe the evidence in favour of the plaintiff using the contra proferentum
5. E) The courts are willing to disregard the requirement of a duty of care.

Answer:  A

Diff: 1      Type: MC      Page Ref: 158

Topic:  Ch. 5 – Product Liability

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

21) Stella bought a cup of coffee at the drive-through window at a coffee shop. Holding the cup between her knees and attempting to take off the lid to add cream, she spilled the coffee. She suffered burns to her thighs. If this happened in Canada, which of the following would be true?

1. A) If Stella sues the coffee shop for negligence, she will only have to prove that the company owed her a duty of care.
2. B) If Stella sues the coffee shop, the company’s best argument is that it didn’t owe her a duty of care.
3. C) To succeed with the defence that she volunteered to take the risk, the coffee shop would have to prove that she deliberately spilled the coffee.
4. D) If the coffee shop claims there was no way to reasonably foresee that Stella would be harmed, the plaintiff’s case would be dismissed even though she suffered burns.
5. E) If the court finds the plaintiff contributorily negligent causing 60% of her loss, she will not be compensated for the 60% by the defendant.

Answer:  E

Diff: 2      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

 

 

22) Celebrating the end of the fall term, Mr. C had already drunk six beers before he arrived with his friends at the Spoke Tavern, run by the student council. After he had two more beers, he was refused more and told he would be asked to leave if he did have more. He returned to the table and continued to drink. He was ordered to leave. While being escorted out, he resisted but was ejected. He snuck back in, “spoiling for a fight,” and was removed once more. He returned, and when pushed through the doorway, he stumbled. His hand went through a small window, and he had to undergo surgery to repair a tendon in his wrist. Mr. C sued the tavern, the bouncer, and the student council (as operators of the tavern) under the Occupiers’ Liability Act. Read each of the following separately and indicate which is false.

1. A) The Occupiers’ Liability Act in this province provides that an occupier of land owes a duty to take reasonable steps to make sure that any person will be reasonably safe.
2. B) If the court holds that Mr. C voluntarily took the risk, Mr. C will get no award of damages from the defendants.
3. C) To successfully use the defence of volenti no fit injuria (he volunteered to take the risk), the court must find that the plaintiff knew the risk, volunteered to take the risk, and expressly or impliedly waived his right of action.
4. D) If the court holds that Mr. C was contributorily negligent, Mr. C could get no compensation from the defendants.
5. E) Under our Occupiers’ Liability Act, a tenant could be liable, not just the land owner.

Answer:  D

Diff: 3      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

23) With regard to the law of negligence, which of the following is false?

1. A) If the court finds that the plaintiff was 40% and the defendant 60% responsible for the loss suffered by the plaintiff, the plaintiff cannot recover the 40% from the defendant.
2. B) Some occupiers’ liability acts set the standard of care owed by the occupier, namely, to take reasonable care that any person is reasonably safe.
3. C) To win his action in negligence, a plaintiff must prove, among other things, that the defendant owed the plaintiff a duty of care.
4. D) If you hurt someone and are sued for negligence, a possible defence is that you didn’t intend to hurt the person.
5. E) If you are negligent and cause damage to another, a possible defence is that the other voluntarily took the risk.

Answer:  D

Diff: 2      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

 

 

24) Pete and John had been hired by the same computer consulting company. They worked a 3-hour shift and walked to a pub, where they had several beers. John said he’d drive Pete home. Pete knew John had been drinking but agreed to go with him anyway. The alcohol affected John’s driving. He lost control of the car, which crashed through Mr. Britt’s fence and Britt’s garage. Pete was injured. John was not injured. Britt’s neighbour, Mr. Watson, called the police. John was charged with the offence of driving while impaired and was found guilty in the criminal proceedings. Given these facts, which of the following is true?

1. A) Since Mr. Britt was not physically injured, he could not sue.
2. B) Mr. Watson, the neighbour, could successfully sue John for negligence.
3. C) Pete could sue John for negligence, but if the court held that Pete volunteered to take the physical and legal risk (volenti non fit injuria), Pete would get no award of damages.
4. D) The principle of vicarious liability is relevant here because John was an employee at the time of the accident. John was charged with an offence; no one could sue him in a civil action for compensation.
5. E) One court action is all that is allowed.

Answer:  C

Diff: 2      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

25) Which of the following statements with regard to the tort of negligence is false?

1. A) If a person is injured by a defective product that he himself did not purchase, he can sue the manufacturer for negligence.
2. B) To win his negligence case, the plaintiff must prove that the defendant owed him a duty of care, was below the standard of care the law requires, and thus caused him foreseeable damage.
3. C) In most provinces, the standard of care imposed on an occupier has been modified by statute.
4. D) For a person to completely escape liability for negligence on the grounds that the plaintiff volunteered to take the risk, the court would have to find that the plaintiff volunteered to accept the physical risk and the legal consequences as well.
5. E) In negligence cases, the special provision of res ipsa loquitor must always be applied in order to establish liability.

Answer:  E

Diff: 3      Type: MC      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Recall

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

 

 

26) Hank rented a new ground-floor condominium for four months before the owner offered to sell it to him. Hank accepted the offer. After Hank became the owner, he built a small patio off the living room. At a house-warming party, one of his friends caught the heel of her shoe between some patio bricks and fell, breaking her arm. It took an abnormally long time to heal because she suffered from an unusual bone disease. Hank has heard the following assertions about liability and asks you about them. Which of the following statements is true?

1. A) The standard of care owed to this visitor is governed by a federal statute and is therefore the same for all provinces.
2. B) Under the governing statute, he owed a duty of care because he now owned the property; he would not have had any duty of care if he had still been renting it.
3. C) He owed no duty of care to persons who came to his place; people must take responsibility to look after themselves.
4. D) The standard of care set by statute is that the occupier has a duty to take reasonable care to see that any guest on the property is reasonably safe.
5. E) If found liable, he would be responsible only for the damages incurred by a normal person who had suffered from such a fall and not for the greater damages actually suffered by this guest.

Answer:  D

Diff: 2      Type: MC      Page Ref: 155

Topic:  Ch. 5 – Occupiers’ Liability

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

27) Ms. J was severely injured as the result of a fall sustained when a portion of a fence surrounding a private cemetery gave way as she was attempting to climb over to visit a grave site. Which of the following is true with regard to an occupier’s liability?

1. A) The standard of care is set by a federal statute and is therefore the same for all the provinces.
2. B) The standard of care required of the occupier is set by provincial statute.
3. C) An occupier owes no duty of care to a trespasser.
4. D) There is no duty of care owed to persons who come onto another’s property whether invited or not; people must take responsibility to look after themselves.
5. E) The duty imposed by the statute is on the landowner not the tenant.

Answer:  B

Diff: 2      Type: MC      Page Ref: 154

Topic:  Ch. 5 – Legislation Impacting Duty of Care

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

 

 

28) Last month, Rueben removed a tall tree in his backyard. He left the large hole because he intended to plant a new tree when the rains began. Sunday, he invited his neighbour, Joe, to come over to watch the Olympics. When Joe came, he cut through the backyard and fell into the hole and broke his arm. Which of the following is true with regard to the liability of an occupier of land?

1. A) The standard of care is set by a federal statute and is therefore the same for all the provinces.
2. B) An occupier owes a duty only to “licencees.”
3. C) There is no duty of care owed to persons who come onto another’s property whether invited or not; persons must take responsibility to look after themselves.
4. D) The standard of care imposed on the occupier is set by provincial statute.
5. E) A tenant cannot be liable; only the owner can be sued.

Answer:  D

Diff: 2      Type: MC      Page Ref: 154

Topic:  Ch. 5 – Special Situations

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

29) When Joan visited her friend Clive, who was renting a small farm in Langley, she was injured by some dangerous cleaning solvent that Clive stores in very large quantities for Soapo Ltd. The solvent had leaked from one of several massive 1000-litre drums. When Joan had walked toward the side door of the farmhouse, she stepped through a puddle of what turned out to be solvent. The solvent not only ruined her shoes, but also burned her skin when some splashed onto her legs. The solvent also drained down into the fish pond on the adjacent property owned by the Nelsons. Read each of the following separately and indicate which is true.

1. A) If the Nelsons sue for any loss, they would not succeed against Clive because he is just the tenant of the farm, not the owner.
2. B) If the Nelsons sued on the rule in Rylands v. Fletcher, the defendant could succeed by showing that there was no intention to harm anyone and reasonable care had been taken to contain the solvent.
3. C) If Joan sued Clive, she would not sue on the rule of strict liability but under the Occupiers’ Liability Act.
4. D) If the Nelsons sued on the rule in Rylands v. Fletcher, they would be barred from also pleading negligence as an alternative cause of action.
5. E) If Joan sues for any loss, she must sue the owner of the farm.

Answer:  C

Diff: 3      Type: MC      Page Ref: 154

Topic:  Ch. 5 – Legislation Impacting Duty of Care

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

 

 

30) Ms. Lam bought a lot next to a house owned by Mr. Dodson. She asked Mr. Dodson for permission to use his electricity while building a house on her property. He refused. He feared his house was too old to handle the electricity load needed. Later, a carpenter employed by Ms. Lam accidentally broke a window of Mr. Dodson’s while moving lumber. Furthermore, the carpenter removed part of Dodson’s fence to make room for needed materials, used Dodson’ house to support the lumber and drove some nails into Dodson’s tree to hold some wires. Dodson complained to Ms. Lam. Irritated by his stand on the electricity and his complaints, Lam began a civil action against him for the tort of defamation, although she had absolutely no grounds for alleging defamation. Which of the following is not supported by the facts given above?

1. A) Dodson has an action against the carpenter for trespass.
2. B) Dodson has an action against Lam on the principle of vicarious liability.
3. C) Dodson has an action against Lam on the grounds of strict liability (the rule of Rylands v. Fletcher).
4. D) Dodson has an action against the carpenter for negligence.
5. E) Dodson could sue Lam for trespass even if there was no damage.

Answer:  C

Diff: 2      Type: MC      Page Ref: 157

Topic:  Ch. 5 – Strict Liability

Skill:  Applied

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

31) Although there was no carelessness on the part of Mr. Tam, and although he had no intention of harming anyone, he could still be sued by someone harmed by dangerous substances that escaped from his property. This is an example of what tort or what principle of tort law?

1. A) Vicarious liability
2. B) Contributory negligence
3. C) False imprisonment
4. D) Strict liability
5. E) Defamation

Answer:  D

Diff: 1      Type: MC      Page Ref: 157

Topic:  Ch. 5 – Strict Liability

Skill:  Recall

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

 

32) For his Superbowl Sunday party, Jack bought, among other things, some Francisco mustard. Even before the game began, one of the guests, Fred, made himself a sandwich using that mustard. When Fred saw another guest, Tad, making a sandwich with the mustard, Fred warned him that the sandwich did not taste right and that he (Fred) didn’t feel too well. Tad ate everything else on his plate, but left the sandwich. Fred became quite ill and had to go to the hospital. It was determined that the mustard was contaminated when it was made. Jack had bought the mustard just an hour before game time from Big Store, which had bought it from DB Distributors Ltd., which had bought it from the manufacturer New Foods Ltd. On these facts, which of the following is true?

1. A) Since Fred did not buy the mustard himself, he must suffer his loss; i.e., he cannot sue anyone.
2. B) Fred could successfully sue Jack for negligence because Jack bought the mustard.
3. C) Tad could successfully sue Jack for negligence.
4. D) Fred could successfully sue the distributor for negligence because the distributor delivered the case of mustard to Big Store.
5. E) Fred could successfully sue the manufacturer New Foods Ltd. for negligence but could not successfully sue Big Store for negligence.

Answer:  E

Diff: 2      Type: MC      Page Ref: 158

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

33) Paul invited several friends over to celebrate Ann’s birthday. About an hour before the guests arrived, Paul bought some sparkling wine and put it in his refrigerator. When all the guests were assembled, Paul lifted the chilled bottle of wine from its gift box. Before it was completely out of the box, the bottle exploded, sending glass in all directions. The glass cut Paul’s hand and also the eye of one of his guests, Joan. No one else was hurt at all. Assuming all these facts could be proved, which of the following is true?

1. A) Because Joan did not buy the wine, she has no cause of action against anyone.
2. B) Joan could sue Paul successfully for the tort of negligence for buying and serving sparkling wine.
3. C) All the guests, including Joan, could successfully sue the manufacturer for negligence; they need only prove that the explosion was the fault of the manufacturing process.
4. D) If Joan sued the manufacturer for negligence, the court could draw, from the circumstantial evidence of the injury, a conclusion that someone must have been negligent, leaving it to the manufacturer to produce evidence to the contrary.
5. E) Only Joan has a right to sue in contract.

Answer:  D

Diff: 2      Type: MC      Page Ref: 158

Topic:  Ch. 5 – Product Liability

Skill:  Applied

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

34) A land appraiser prepared an appraisal of a property for a real-estate development company. The appraiser had been told that the appraisal would be used by the company to attract potential investors. Because the appraiser forgot to check the recent changes in the zoning by-laws, the appraisal was not accurate; the investor, a party unknown to the appraiser, was misled about the value of the land and, consequently, suffered a financial loss. On these facts, which of the following is true?

1. A) A land appraiser owes a duty of care to his client, the company, but not to any potential investors.
2. B) A land appraiser owes a duty of care to his client, and to potential investors only if he knows the name of the investor.
3. C) The investor might sue the appraiser for “negligent misstatement causing economic loss.”
4. D) The investor must suffer his own loss, because an investor takes the risk and so must take care.
5. E) A person cannot be sued for words that cause loss, only for actions that cause physical injury.

Answer:  C

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

35) To have the schools valued for insurance purposes, a school district hired a firm of surveyors to give them a statement of value. To prepare the report, the surveyors took the relevant measurements, which were then given to a statistical tabulating company that does the calculations based on the measurements. Surveyors always use the services of such tabulating companies. An error was made in the calculations, so the surveyor’s report was wrong. Therefore, the buildings were under-insured. When one of the school buildings was destroyed by fire, the school district did not get sufficient funds from the insurance company to rebuild the school. On these facts, which of the following is true? (Assume that the school district has the ability to sue and be sued in court.)

1. A) This action would most likely be commenced in the Small Claims Court.
2. B) The insurance company can successfully sue the statistical tabulating company for nuisance.
3. C) The school district can successfully sue the statistical tabulating company for negligent misstatement causing economic loss.
4. D) The school district could successfully sue the surveyors for nuisance, for subcontracting the calculating work.
5. E) The statistical tabulating company cannot be sued by the school district.

Answer:  C

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

36) In which of the following would the plaintiff not succeed in an action for negligence?

1. A) A real-estate agent accidentally forgot to lock the back door of the house he had just shown. Before the owner returned, someone broke in and stole the TV. The owner sued the agent.
2. B) A real-estate agent failed to check the zoning and assured the purchasers that they could build a duplex on the property. Relying on that statement, they purchased the property.
3. C) Shunan was made sick by drinking a contaminated cola bought for her by her friend Fred. She sued the manufacturer.
4. D) Dr. Alberts used the skill of a reasonable doctor in that field, but the patient did not respond to the treatment and lost hearing in one ear. She sued the doctor.
5. E) Pradeep was hurt when a driver of a Gino’s pizza truck carelessly ran through a yellow traffic light on his way to deliver a pizza. Pradeep sued the driver and Gino, his employer, although Gino wasn’t even in the truck.

Answer:  D

Diff: 1      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

37) In Hodgkinson v. Simms, an accountant advised a client to invest in a real estate development while also acting for the developers. What did the Supreme Court of Canada find?

1. A) The presence of a financial risk was the identifying feature of a fiduciary relationship and, in this case, imposed the fiduciary duty.
2. B) The presence of a financial risk was the identifying feature of a fiduciary relationship but, in this case, did not impose a fiduciary duty.
3. C) The presence of loyalty, trust, and confidence were identifying features of a fiduciary relationship and, in this case, imposed the fiduciary duty.
4. D) A fiduciary relationship could not arise in circumstances where an investor acted of his own accord.
5. E) A fiduciary relationship could not arise in commercial circumstances, such as those found in this case.

Answer:  C

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Fiduciary Duty and Breach of Trust

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

38) Sumanthra, an accountant, prepared financial statements for ZeeTech Ltd. A cutting edge technology company, ZeeTech was actively seeking private investment in order to finance a new electronics device. Despite the fact that Sumanthra followed Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), the statements she prepared were misleading. Arif and Alena, both potential investors, relied on the statements Sumanthra had prepared. As a result of their reliance, Arif and Alena both invested in ZeeTech and lost a considerable sum of money. Independently, Arif and Alena decided to sue Sumanthra for their financial loss. Which of the following is true?

1. A) Sumanthra will not escape liability because accountants are automatically liable for losses arising from the use of financial statements they prepare.
2. B) Sumanthra will not escape liability simply because she followed GAAP and IFRS.
3. C) Sumanthra has nothing to worry about, because an accountant who follows GAAP and IFRS could not have breached the standard of care.
4. D) Sumanthra has nothing to worry about, because accountants are immune from liability.
5. E) Sumanthra has nothing to worry about, because negligence requires proof of more than mere financial loss.

Answer:  B

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

39) Which of the following statements describes the standard expected of experts?

1. A) Require skills and abilities expected of an average person.
2. B) Must exercise skill with degree of care expected from a reasonable person in that profession.
3. C) Inexperience excuses incompetence.
4. D) Common practice always sets the appropriate standard.
5. E) The standard of an expert need be perfection.

Answer:  B

Diff: 2      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

40) An investor who wanted to build a duplex asked the city zoning officer whether Lot A of Plan 16, known as 1 Street, was zoned for a single-family house or a duplex. The zoning officer was distracted by a news report on the radio and accidentally gave the investor a printed copy of the zoning for the wrong lot that said “duplex,” although 1 Street was only zoned for single-family houses. After the investor began building a duplex, the city stopped him for building contrary to the zoning by-laws. He lost $50,000. On these facts (assume all can be proven), which of the following is true?

1. A) A person can only be sued for actions that cause physical injury.
2. B) The cause of action most likely to be taken by the investor in this case is “deceit.”
3. C) The zoning officer can be sued even though the investor did not have a contract with him (i.e., he didn’t pay for the information).
4. D) The employer of the zoning officer could not be sued since the employer did no wrong.
5. E) The zoning officer could not be sued successfully since he had no intention of hurting anyone; his error was just an accident.

Answer:  C

Diff: 3      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

41) An employee prepared an appraisal of a property for his real-estate development company. The employee had been told that the appraisal would be used by the company to attract a potential investor, Mr. Jones, for the company’s client, Mr. Lee. Because the appraiser carelessly forgot to check the recent changes in the zoning by-laws, the appraisal was not accurate. Mr. Jones was misled about the value of the land and suffered a financial loss of $200,000. On these facts, which of the following is true?

1. A) Mr. Jones could not take any action because he had no contract with the company or the appraiser.
2. B) A person cannot be sued for words that cause loss, only for actions that cause physical injury.
3. C) If Jones sues the appraiser, he cannot also sue the employer company.
4. D) The cause of action most likely to be taken by the investor is defamation.
5. E) To win in an action against the appraiser, Jones must prove that the appraiser owed him a duty of care, fell below the standard of care owed, and thereby caused him a foreseeable loss because of his reliance on the information.

Answer:  E

Diff: 3      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

42) Jack works as a financial-planning consultant for Adco Ltd., a company that provides financial advice to its clients. At a three-martini lunch with Benson, one of Adco’s clients, and Carson, a friend of Benson’s, Jack mistakenly advised Benson to buy shares of Moose Jaw Mining because he thought that Adco had investigated the prospects of the company. In fact, Adco had investigated Goose Jaw Mining and was recommending it to its clients. As it turned out, Benson ignored Jack’s advice but Carson bought a lot of Moose Jaw shares and lost all of his money when the mining operation went broke. Which one of the following statements accurately describes Carson’s legal situation?

1. A) Because there was no contractual connection between Carson and anyone else, he has no legal right to compensation.
2. B) Carson will have to sue Benson and then Benson can turn around and sue Jack under the principles of vicarious liability.
3. C) Jack cannot be held responsible for Carson’s loss because someone who is incapacitated at all by alcohol cannot be held liable in tort for actions while incapacitated.
4. D) Jack cannot be held liable for Carson’s loss, but Adco can be because it employed Jack.
5. E) Jack can only be held liable if Carson can establish that Jack owed him a duty to be careful.

Answer:  E

Diff: 3      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

43) To win his action in negligence against a professional person, the plaintiff must prove, among other things, that the defendant’s conduct was below an acceptable standard of care. Which of the following is the legal standard of care demanded of a professional person?

1. A) That he act to the very best of his ability
2. B) That he act as may reasonably be expected of the normally skilled professional of that type
3. C) That he act as a reasonably prudent person
4. D) That he act sincerely and with goodwill
5. E) That he act sincerely and as may reasonably be expected of a skilled professional

Answer:  B

Diff: 1      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

44) Which of the following statements does not describe the standard expected of experts?

1. A) Require skills and abilities expected of a professional in that field.
2. B) Must exercise skill with degree of care expected from a reasonable person in that profession.
3. C) Inexperience does not excuse incompetence.
4. D) Common practice always sets the appropriate standard.
5. E) The standard of an expert need not be perfection.

Answer:  D

Diff: 1      Type: MC      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

45) In most Canadian jurisdictions, ________ can be obtained on an individual basis with an insurance corporation, but it is more often acquired by businesses as part of an employee benefits package.

1. A) property insurance
2. B) business interruption insurance
3. C) liability insurance
4. D) disability insurance
5. E) professional liability insurance

Answer:  D

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

46) Often, a business suffering a loss from a fire will have insurance to cover the property damage, but there will be nothing to cover the revenue losses the business suffers during the period it is closed down for repairs.  What form of insurance will cover the latter issue?

1. A) liability insurance
2. B) disability insurance
3. C) business interruption insurance
4. D) property insurance
5. E) professional liability insurance

Answer:  C

Diff: 1      Type: MC      Page Ref: 146

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

47) ________ provides only a benefit upon death, and the premiums are lower than whole life insurance, which provides coverage in the event of death as well as investment potential and retirement income.

1. A) Liability insurance
2. B) Health insurance
3. C) Term insurance
4. D) Death insurance
5. E) Property insurance

Answer:  C

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

48) ________ is the type of insurance most closely associated with torts.

1. A) Liability insurance
2. B) Business interruption insurance
3. C) Disability insurance
4. D) Property insurance
5. E) Umbrella insurance

Answer:  A

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

49) A recent innovation in the insurance industry is ________ where several types of liability are bundled together, allowing the insured higher limits of coverage for a more economical premium.

1. A) liability insurance
2. B) business interruption insurance
3. C) term insurance
4. D) umbrella liability
5. E) bundled liability insurance

Answer:  D

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

50) In which one of the following would Joe be able to collect the entire amount of insurance claimed?

1. A) Joe insured his law partner’s life for $500,000 and the amount he actually lost when the partner died was only $100,000. Joe claims $500,000.
2. B) Joe’s house suffers $20,000 damage, and he only had it insured for $100,000, when the actual value was over $250,000. Joe claims $20,000.
3. C) Joe owns a one-half interest in a house valued at $100,000 that is completely destroyed in a fire. The house is insured for that amount and Joe makes a claim for $100,000.
4. D) Joe insured the club house of a Hell’s Angels motorcycle club located in the next block for $75,000; the house is valued at about that amount. The club house is subsequently destroyed in a fire. Joe claims $75,000.
5. E) Joe took out a life insurance policy on his wife for $500,000, and shortly thereafter, during a fight when he was in a drunken rage, he struck his wife, causing her death. Joe claims $500,000.

Answer:  A

Diff: 3      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

51) In Mueller v. Wawanesa Insurance Co., insurance had been taken out on a house when it was being used as a residential dwelling. The building was occupied by three members of a motorcycle gang. The insurance company was not notified of the change. What was the result when the house was destroyed by fire?

1. A) The failure to notify of the change voided the policy and the insurance company did not have to pay.
2. B) The failure to notify of the change voided the policy, but the insurance company still had to cover the loss.
3. C) The failure to notify of the change was immaterial, because there was no proof that is what caused the fire.
4. D) The failure to notify of the change was immaterial, because there was no misrepresentation at the time the policy was taken out.
5. E) The failure to notify of the change resulted in the insured being charged higher premiums.

Answer:  A

Diff: 2      Type: MC      Page Ref: 177

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

52) Which of the following is not an appropriate matter for insurance coverage?

1. A) Insurance against lost profits
2. B) Insurance against fire in a home
3. C) Insurance against the wrongful conduct of the insured, e.g., theft
4. D) Insurance against loss of life
5. E) Insurance against damage to property

Answer:  C

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

53) Which one of the following explains the effect of a co-insurance clause?

1. A) A co-insurance clause provides for more than one person paying the premium.
2. B) A co-insurance clause provides for the insurance claim to be split between two or more beneficiaries.
3. C) A co-insurance clause provides for the insured to assume part of the responsibility for any loss.
4. D) A co-insurance clause provides for several different properties being insured under the same policy.
5. E) A co-insurance clause provides for the insurance company arranging their own insurance on a large policy.

Answer:  C

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

54) Where a person owns a half interest in a house valued at $200,000 and has insurance on that property in the amount of $400,000, if the house burns down, causing a loss of $100,000, how much will that person collect?

1. A) $50,000
2. B) $100,000
3. C) $200,000
4. D) $400,000
5. E) Nothing

Answer:  A

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

55) Business interruption insurance is designed to cover which of the following situations?

1. A) A person owns a restaurant business and the restaurant is destroyed by fire. The insurance coverage pays for the repair of the building.
2. B) A person has a partner in his restaurant business and that partner catches a disease and dies. The insurance provides for coverage of the death of the partner.
3. C) A person owns a restaurant business and the restaurant is destroyed by fire. The insurance covers revenue losses caused by the business being closed down for several months.
4. D) A person is an employee at a restaurant business and gets ill. The insurance coverage pays him his wages while he is off work sick.
5. E) A person operates a restaurant business and some customers suffer injury due to food poisoning. The insurance coverage provides for payment to cover any losses incurred because of claims by the restaurant arising from damages paid out to these customers.

Answer:  C

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

56) Joe entered a store and approached a display of china. He was examining an extremely valuable vase and carelessly dropped it, destroying it. Which of the following is correct with respect to his liability?

1. A) If the store has insurance coverage, the insurance will cover his careless conduct and he doesn’t have to worry about anything.
2. B) If the store has insurance coverage, the insurance will pay the store for the loss but may pursue Joe for repayment by suing him for negligence.
3. C) Joe cannot be sued for the loss because Joe is not a party to the insurance contract.
4. D) If the store does not have insurance coverage, they should have and so Joe has no responsibility in these circumstances.
5. E) Joe is responsible only if the store has no insurance coverage.

Answer:  B

Diff: 3      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

57) In which one of the following would Joe be able to collect the entire amount of insurance claimed?

1. A) Joe insured his law partner’s life for $500,000 and the amount he actually lost when the partner died was only $100,000. Joe claims $500,000.
2. B) Joe’s house suffers $20,000 damage, and he only had it insured for $100,000, when the actual value was over $250,000. Joe claims $20,000.
3. C) Joe owns a one-half interest in a house valued at $100,000 that is completely destroyed in a fire. The house is insured for that amount and Joe makes a claim for $100,000.
4. D) Joe insured the club house of a Hell’s Angels motorcycle club located in the next block for $75,000; the house is valued at about that amount. The club house is subsequently destroyed in a fire. Joe claims $75,000.
5. E) Joe took out a life insurance policy on his wife for $500,000, and shortly thereafter, during a fight when he was in a drunken rage, he struck his wife, causing her death. Joe claims $500,000.

Answer:  A

Diff: 3      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

58) Property insurance should correspond to the actual value of the property for all of the following reasons except

1. A) if the property is insured for more, the insured will pay too high a premium.
2. B) no insurance means no compensation for loss.
3. C) if the property is insured for less, the insured will only receive partial compensation.
4. D) if the property is insured for less, there is a danger of being a co-insurer.
5. E) if the property is insured for more, there will be no compensation for loss.

Answer:  E

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

59) In which of the following situations will the insured be able to collect the entire amount of the insurance claimed?

300. A) Jane had a compact disc player worth $300. It was portable and it was stolen from her car. She had a house policy and a car policy, both of which provided coverage. Jane claimed $300 from each policy.
301. B) Joe has his house insured for $100,000 when the actual value of the house is $200,000. When it burns down, Joe claims $200,000.
302. C) Joe owns a house on a lot in Regina, and although the property would sell for $100,000, the value of the house is only $50,000. Joe takes out a $50,000 policy against loss to the house, which is subsequently destroyed by fire. Joe claims $50,000.
303. D) Joe and his wife both own a one-half interest in their house, worth $100,000. Joe took out an insurance policy in his own name for the $100,000 and the house is destroyed by fire. Joe claims the $100,000.
304. E) Joe takes out insurance on his neighbour’s house for $50,000 because his neighbour is notoriously careless. Sure enough, the house burns down with $50,000 loss.

Answer:  C

Diff: 3      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

60) In Heitsman v. Canadian Premier Life Insurance Co., an insurance company denied coverage on the basis of an ambiguous exclusion of liability clause. What did the Court find?

1. A) The contra proferentum rule was applied, and the exclusion was narrowly interpreted.
2. B) The contra proferentum rule was applied, and the exclusion was broadly construed.
3. C) The contra proferentum rule was applied, so the interpretation favoured the insurance company.
4. D) The contra proferentum rule did not apply, because the insurance contract was in standard form.
5. E) The contra proferentum rule did not apply, because the insured had signed the contract voluntarily.

Answer:  A

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

61) Which of the following is correct with respect to the meaning of an insurable interest?

1. A) An insurable interest means that the person causing the loss is required to show enough interest in what he is doing to be careful.
2. B) The insurance company must have received a premium before it can be said to have an interest in the agreement and be bound to pay when a claim is made.
3. C) The beneficiary or person receiving payment must have an ownership interest in the thing being insured.
4. D) The person taking out the insurance contract must be in a position that he will suffer a loss if the insured-against event occurs.
5. E) This term describes when a person has taken out insurance on something.

Answer:  D

Diff: 1      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

62) Some jurisdictions have instituted “no fault” insurance programs. Which of the following statements is true?

1. A) Under common law, if a person is not at fault, damages can always be recovered in tort.
2. B) No fault insurance means no compensation for loss.
3. C) No fault insurance assumes there is a voluntary assumption of risk.
4. D) There is always an assumption of contributory negligence under no fault insurance programs.
5. E) Under no fault programs, people are treated the same and compensated for their injuries whether they are at fault or not.

Answer:  E

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 11. Explain the significance of insurance being a contract of utmost good faith.

Bloom’s Taxonomy:  Knowledge

 

 

63) Which of the following is correct with respect to the principle of subrogation as it relates to insurance law?

1. A) Subrogation refers to the insured’s right to demand payment from the insurance company if the insured-against event takes place.
2. B) Subrogation refers to the principle that the insured cannot benefit from his own wrongdoing.
3. C) Subrogation refers to the principle that, if the insured does not take out enough insurance, he will be taken to be responsible for a portion of any loss incurred.
4. D) Subrogation refers to the principle that, if an insurance company pays out on a policy, they assume all of the rights of the insured against the person causing the loss.
5. E) Subrogation refers to the practice of the insurance companies taking out their own insurance where the policy involves potentially large losses or high risk.

Answer:  D

Diff: 1      Type: MC      Page Ref: 180

Topic:  Ch. 5 – Subrogation

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

64) Which of the following statements is correct with respect to bonding?

1. A) Bonding is another term for insurance. The two terms, bonding and insurance, are interchangeable.
2. B) If a person is bonded and that person commits some wrongful act such as stealing a client’s money, the bonding company is bound to compensate him for any losses he suffers from being caught.
3. C) Bonding provides protection to the victim injured by the wrongful conduct of the person bonded.
4. D) Bonding provides protection against losses incurred because of fluctuations in the financial markets.
5. E) Bonding is a government certification system whereby the government guarantees that a person so bonded or certified will do the job he is hired to do as set out in the bonding certificate.

Answer:  C

Diff: 2      Type: MC      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

65) The court determines the standard of care required and whether or not there was a failure to live up to that standard.

Answer:  TRUE

Diff: 1      Type: TF      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

66) Children are not held liable for their torts.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

67) If a person is injured while attempting to rescue someone, he or she may have a claim against the person who caused the situation that endangered the victim and the rescuer.

Answer:  TRUE

Diff: 3      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

68) At common law, a mother owes a duty of care to an unborn child.

Answer:  FALSE

Diff: 3      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

69) A reasonable person is one who is prudent and careful.

Answer:  TRUE

Diff: 1      Type: TF      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

70) A principle established in Donoghue v. Stevenson is the test used to determine the standard of care that must be exercised by the defendant to escape liability.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 141

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

71) We owe a duty to anyone we can reasonably anticipate might be harmed by our conduct.

Answer:  TRUE

Diff: 1      Type: TF      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

72) If a person attempts to help, there is a duty to exercise reasonable care.

Answer:  TRUE

Diff: 3      Type: TF      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

73) A person has to prove only that another caused his injury to succeed in a negligence action.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

74) Innkeepers at common law were required to protect their guests from the wrongful acts of others, even when the innkeeper or servant was not at fault.

Answer:  TRUE

Diff: 1      Type: TF      Page Ref: 157

Topic:  Ch. 5 – Innkeeper’s Liability

Skill:  Recall

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

75) Strict liability means that liability can be established even when there is no fault.

Answer:  TRUE

Diff: 2      Type: TF      Page Ref: 157

Topic:  Ch. 5 – Strict Liability

Skill:  Recall

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

 

76) Absent a statutory provision to the contrary, parents are not responsible for their children’s torts unless there was obvious failure to control, instruct, or supervise.

Answer:  TRUE

Diff: 3      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

77) The standard of care that is required of a professional in a negligence action is that she acts to the best of her ability.

Answer:  FALSE

Diff: 1      Type: TF      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

78) The occurrences of professional malpractice actions have decreased dramatically in recent years, due largely to the increased availability of liability insurance.

Answer:  FALSE

Diff: 1      Type: TF      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

79) No-fault personal liability automobile insurance is an attempt to distribute losses among the most accident-prone drivers.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

80) The institution of no-fault insurance programs in some jurisdictions allows people to be compensated for their injuries only if they are not at fault.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

81) Business interruption insurance covers the policy-holder when an unforeseen event causes a business to permanently cease operation.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

82) Most insurance contracts require insured parties to maintain certain safety and security standards to protect themselves against the risk of fire and theft.

Answer:  TRUE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

83) There need not be negligence or some other basis for liability on the part of the insured for the insurer to pay out on the policy.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

84) Death is inevitable, and so life insurance pay-outs are calculated on the basis of a prediction of how long a person of a certain age and health can be expected to live.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

85) Health care services in Canada are funded through the government-sponsored medical system, which is often supplemented by plans providing extended coverage.

Answer:  TRUE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

86) A recent innovation in the insurance industry is where several types of liability are bundled together, allowing the insured higher limits of coverage for a more economical premium.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

87) Insurable interest means that the insured must have a personal stake or interest in whatever is being insured.

Answer:  TRUE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

88) When there is ambiguity in the meaning of a limitation clause in an insurance contract, the courts defer to the party who drafted the contract.

Answer:  FALSE

Diff: 3      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

89) Insurance agents owe important obligations to their principals, but do not owe any specific duty to their customers.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 11. Explain the significance of insurance being a contract of utmost good faith.

Bloom’s Taxonomy:  Knowledge

 

90) The forfeiture rule will not allow a criminal to profit from a crime, but does not affect those claiming through the criminal’s estate.

Answer:  FALSE

Diff: 3      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Applied

Objective:  Chapter 5: 11. Explain the significance of insurance being a contract of utmost good faith.

Bloom’s Taxonomy:  Knowledge

 

91) It is up to an insured whether the insurer repairs or replaces damaged goods.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 11. Explain the significance of insurance being a contract of utmost good faith.

Bloom’s Taxonomy:  Knowledge

92) Once it has paid out on the loss, an insurance company can step into the shoes of the insured and pursue a claim against the person who caused the loss.

Answer:  TRUE

Diff: 3      Type: TF      Page Ref: 180

Topic:  Ch. 5 – Subrogation

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

93) A surety bond provides assurance that the party to a contract will perform its part of the contract.

Answer:  TRUE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

94) A fidelity bond is when the employee pays the employer a fee to cover themselves while they are on the job.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

95) An insurable interest refers to the fact that the insurance company has to have been paid a premium so that they have an interest in the contract.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

 

96) An insurance company’s right to subrogation refers to their right to refuse to pay where the insured is responsible for his own loss.

Answer:  FALSE

Diff: 2      Type: TF      Page Ref: 180

Topic:  Ch. 5 – Subrogation

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

97) What elements must be established in order to succeed in a negligence action?

Answer:  1. A duty of care owed to the plaintiff.

2. Breach of that duty (failure to live up to the standard of care).
3. Causation (actual and proximate).
4. Damage.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 1. Identify the four elements of a negligence claim.

Bloom’s Taxonomy:  Knowledge

 

98) Tom is complaining about the carelessness of his neighbour and asks you if you think he could sue him for negligence and win. Explain what a plaintiff must prove in order to sue successfully for the tort of negligence and have the defendant pay 100% of his loss.

Answer:  Tom would have to prove that a duty was owed by his neighbour to him, that the neighbour failed to live up to that duty, and that this failure caused an injury or loss to Tom. Also, if brought up by the neighbour, Tom would have to show that the damage was not too remote and that there was no contributory negligence on his part.

Diff: 3      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

99) Explain what is meant by the “reasonable person” test.

Answer:  This test is used in many areas but is especially important in determining the standard against which the defendant’s conduct is measured in a negligence action. The reasonable person here is a careful, prudent, observant person going about the activities, not the average person. The test is analogous to par in the game of golf. Par is not what an average golfer would obtain as a score, but the score one would expect from a good golfer having a good day.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

100) Explain how the courts determine whether a duty of care exists in a negligence action.

Answer:  The test of reasonable foreseeability applies. That is, could a reasonable person have anticipated that his conduct could cause harm to another? If the answer is yes, the duty exists. However, note that the Anns case may permit a court to not enforce the duty for public policy reasons.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

101) Distinguish between misfeasance and nonfeasance.

Answer:  Nonfeasance involves a person failing to do something that could have prevented injury to another. Misfeasance involves an act or conduct that causes injury to another. As a general rule, nonfeasance is not actionable unless there is some particular duty, such as if the person being sued were a guardian, parent, relative, or had an occupation such as lifeguard that demanded action.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

102) In determining duty, what kind of factors would the court take into consideration in determining whether the defendant lived up to the standard of a reasonable person?

Answer:  The risk involved, the dangerous nature, the type of activity involved, the public benefit of such an activity, and the expense of adhering to a higher standard would be considered.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

103) What test is used to establish a duty of care?

Answer:  Reasonable foreseeability test

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

 

104) What is the reasonable foreseeability test used for?

Answer:  To establish a duty of care

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

105) What test is used to determine the standard of care?

Answer:  The reasonable person test

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

106) What is the reasonable person test used for?

Answer:  To determine the standard of care

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

107) Does liability vary with age? Explain.

Answer:  While a standard does not diminish in the case of an elderly person, the standard required of children is the level of conduct that would be expected of a reasonable child of the same age.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

108) What is the test used for physical causation?

Answer:  The “but for” test

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

109) What is the “but for” test used for?

Answer:  Physical causation

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

110) What is the test used for legal causation?

Answer:  Remoteness test

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

111) What is the remoteness test used for?

Answer:  Legal causation

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

112) The principle that we must take our victims as we find them is often referred to as ________.

Answer:  the thin skull rule

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

113) When the Court recognizes pre-existing frailties and the award of damages aims at restoring the plaintiff to that position, we say the Court is applying ________.

Answer:  the crumbling skull rule

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

114) Joe was driving his automobile when Sam came from a side street and went through a stop sign without stopping, almost causing an accident. Joe swerved to avoid Sam and was successful in doing so. He wrote down Sam’s licence number and sued Sam for his negligent driving. Indicate the expected result.

Answer:  Joe will fail because there was no damage.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

115) Mary was driving down the road when Sam came out from a side road, went through a stop sign, and struck the side of her car. Upon later examination of Mary’s car, it was determined that the brakes were worn down beyond the point of safety. Sam sued her for negligence. Explain the likely result.

Answer:  If Mary didn’t notice Sam and didn’t touch the brakes, then her poor brakes had absolutely nothing to do with the accident and did not cause it. It was Sam’s negligence that caused the accident when he went through the stop sign. If, however, she did see Sam coming through the stop sign and was unable to stop because of her defective brakes, she at least contributed to the accident by her negligence.

Diff: 3      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

116) Explain under what circumstances the defence of remoteness can be used in a negligence action.

Answer:  Where some sort of injury or damage was reasonably foreseeable, but in fact the way that the injury took place was strange to the point of being completely unexpected, or unusual so that the type of damage itself was not foreseeable, then the injury may be too remote and therefore not actionable.

Diff: 2      Type: ES      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Recall

Objective:  Chapter 5: 3. Describe breach of the standard of care, identifying the test used to determine if a breach has occurred.

Bloom’s Taxonomy:  Knowledge

 

 

117) Distinguish between a licensee, an invitee, and a trespasser.

Answer:  An invitee is a person who comes on the property for a business purpose. A licensee is one who is there with permission, such as a visitor or guest. A trespasser is one who is on the property without legal right.

Diff: 2      Type: ES      Page Ref: 155

Topic:  Ch. 5 – Occupiers’ Liability

Skill:  Recall

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

118) Explain the importance of the distinction between an invitee, licensee, and trespasser.

Answer:  In some provinces, the standard of care imposed on the occupiers towards those who are using the property varies with the status of the visitor. The obligation owed to an invitee is to take reasonable steps to protect the invitee from unusual danger on the property. The duty owed to a licensee, however, is to inform or warn that licensee of any hidden danger on the property, and the duty owed to the trespasser is simply not to wilfully or recklessly cause that trespasser injury. Note that this standard has been changed by statute in many provinces and by court cases in specific provinces.

Diff: 3      Type: ES      Page Ref: 155

Topic:  Ch. 5 – Occupiers’ Liability

Skill:  Applied

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

119) What is the last clear chance doctrine?

Answer:  Historically, this doctrine held that the person who had the last opportunity to avoid the accident and failed to do so was completely responsible.

Diff: 3      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

120) Because of the devastating losses and injuries associated with automobile collisions, what have many provinces done?

Answer:  Many have turned to compulsory insurance schemes, while some have gone further by instituting no-fault programs. Ontario has passed controversial legislation setting a threshold for physical injury before non-pecuniary damages can be awarded.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 4. Explain how both physical and legal causation and damage are proven.

Bloom’s Taxonomy:  Knowledge

 

 

121) Joe, a concert pianist, was walking down the street when he was struck by Harry, a careless skate boarder. Joe was knocked down and crushed his hand. When Joe sued Harry for his negligence, claiming the loss of income from his profession (he could never play the piano again), Harry countered with the defence that there was no way he could have anticipated that the person he was going to hit was a concert pianist. Explain his likelihood of success in raising this defence.

Answer:  You take your victim the way you find him, and the fact that the damages are unusual because of the special circumstances of the victim is no defence.

Diff: 3      Type: ES      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

 

122) Indicate under what circumstance the defence of voluntary assumption of risk or volenti will be available.

Answer:  The person being sued for negligence will be able to raise the defence of voluntary assumption of risk on the part of the plaintiff only where that plaintiff has voluntarily put himself in harm’s way, to the extent that he not only assumed the physical risk but the legal risk as well, somehow conveying to the other party that he is absolved with that person of legal liability for any injury suffered.

Diff: 2      Type: ES      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Recall

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

123) Joe was drunk and driving his car. When he saw Sam on the side of the road hitch-hiking, he opened the door and offered Sam a lift. Sam got in despite the fact that he could smell alcohol on Joe’s breath. Subsequently, Joe was in as accident, in which Sam was injured. Sam has sued Joe for negligence. Indicate what likely defence Joe would use in these circumstances and whether it would be successful.

Answer:  Joe would use voluntary assumption of risk but would not likely be successful because in these circumstances Sam assumed the physical risk but not the legal risk. There is no indication by Sam in these circumstances that when he got into the car he was absolving Joe of legal responsibility for any injury that might result.

Diff: 3      Type: ES      Page Ref: 151

Topic:  Ch. 5 – Defences

Skill:  Applied

Objective:  Chapter 5: 5. Distinguish the defences applicable to the tort of negligence.

Bloom’s Taxonomy:  Knowledge

 

 

124) Explain the standard of care that must be imposed on the occupier of a property toward a visitor on that property in your province.

Answer:  The standard of care and the relevant exceptions vary from province to province. Most provinces have enacted legislation in the form of occupiers’ liability statutes that impose a single standard of care on visitors, usually to take reasonable care to keep such visitors reasonably safe.

Diff: 2      Type: ES      Page Ref: 154

Topic:  Ch. 5 – Legislation Impacting Duty of Care

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

 

125) Give three examples where tort standards have been modified by legislation.

Answer:  1. Motor Vehicle Act

2. Innkeepers (Hotelkeepers) Act
3. Occupiers’ Liability Act
4. In some circumstances, human rights legislation
5. Consumer protection acts
6. Environmental protection acts

Diff: 2      Type: ES      Page Ref: 154

Topic:  Ch. 5 – Legislation Impacting Duty of Care

Skill:  Recall

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

 

126) In Canada, under what circumstances will the owner of property be held strictly liable for his conduct?

Answer:  Where he brings something inherently dangerous on the property and it escapes, causing injury to someone off the property.

Diff: 2      Type: ES      Page Ref: 155

Topic:  Ch. 5 – Strict Liability

Skill:  Recall

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

127) In Canada, in order for a manufacturer to be held liable for injury caused by his product to an ultimate consumer, what must be shown?

Answer:  That there was a duty to be careful in manufacturing that good, and that there was a failure to live up to the standard of a reasonable person in that manufacturing process (assuming of course that some sort of injury had resulted and that injury resulted from the normal use of those goods).

Diff: 3      Type: ES      Page Ref: 158

Topic:  Ch. 5 – Product Liability

Skill:  Recall

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

128) Harry operated a game farm in the suburbs of a large city. He took all reasonable precautions to keep the animals, some of which were dangerous, within the confines of that game farm. One night, a group of protesters came onto the property and released all the animals as an act of protest against the incarceration of such wild creatures. One of the animals, a cougar, went onto a neighbour’s property and killed an expensive show dog. That neighbour sued Harry. Explain the neighbour’s likelihood of success.

Answer:  A game farm is an unusual use of property. The dangerous animals created a situation of strict liability for Joe. When they escaped, although it was not his fault and he could not have anticipated this kind of interference, he would still be held strictly liable for the loss.

Diff: 3      Type: ES      Page Ref: 157

Topic:  Ch. 5 – Strict Liability

Skill:  Applied

Objective:  Chapter 5: 7. Distinguish among strict liability, vicarious liability, and product liability.

Bloom’s Taxonomy:  Knowledge

 

129) To what does “errors and omissions” insurance refer?

Answer:  This is the name often given to the specialized liability insurance that professionals carry.

Diff: 1      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

130) Explain how the standard of care imposed varies when particular expertise is involved (e.g., a doctor).

Answer:  The reasonable person test really means a reasonable person in the circumstances. Therefore, the standard imposed with medical malpractice is what a reasonable doctor would have done in those circumstances. With other professions, what would a reasonable accountant or reasonable plumber or electrician have done in the circumstances?

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

131) Historically, how did the law treat negligent misstatement differently than negligent misconduct?

Answer:  Negligent misstatement was not actionable unless some specific duty existed, as in a contract or employment relationship. There was no general duty which allowed an action for negligent words.

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

132) How is negligent misstatement treated in Canada today?

Answer:  The case of Haig vs. Bamford established in Canada that people could be sued for their careless words. (Note, however, that the test to determine duty may be narrower than when dealing with conduct.)

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

133) How are professionals treated differently under the rules of negligence?

Answer:  They must live up to the standard of a reasonable accountant, a reasonable lawyer, a reasonable doctor, etc., rather than the general reasonable person standard.

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

134) What is the role of self-governing professional bodies?

Answer:  Typically, these bodies have varying degrees of control over the relevant practice. This can extend to granting licences, determining membership, setting standards of conduct, setting educational qualifications and continuing training requirements, and disciplinary matters.

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Recall

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

135) In insurance, what do comprehensive policies cover?

Answer:  These policies cover everything except what is specifically excluded (typically, acts of war, riots, illegal activities).

Diff: 1      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

136) Joe owned a house that would cost $200,000 to replace. He took out an insurance policy for only $100,000, reasoning that any damage that would take place would likely be under that amount. In fact, there was a fire and the total loss was $50,000. Indicate what problems Joe might run into when he tries to collect.

Answer:  If the value of the house is $200,000 and he has only $100,000 coverage on it, then he may be considered a co-insurer for the difference, depending on the terms of the contract. (For example, if the contract requires him to keep at least 80% of the value covered by insurance and he has only 50% coverage, he would be the co-insurer for the difference of 30%.) On any claim, therefore, he will have to bear a portion of the loss himself.

Diff: 3      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

137) Describe three different types of insurance that a business person might obtain in relationship to his business.

Answer:  Property insurance, business interruption insurance, life insurance (for key personnel), health insurance with respect to the personnel involved, and liability insurance.

Diff: 1      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Types of Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

138) Joe was a customer in Sam’s store when he carelessly dropped a very expensive vase, but he was relieved when he found that Sam had insurance to cover the loss. Explain Joe’s legal position in these circumstances.

Answer:  Joe should not be so relieved. When the insurance company pays for the loss, they step into Sam’s shoes (subrogation) and could sue Joe, just like Sam could have for his negligence, and Joe may be required to pay.

Diff: 2      Type: ES      Page Ref: 180

Topic:  Ch. 5 – Subrogation

Skill:  Applied

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

139) What is the typical result when spouses have overlapping extended benefits coverage, such as dental and disability?

Answer:  Usually, there is a deductible amount that must be paid or a limitation on the coverage. When there are two policies, one can often be used to cover the shortfall of the other (but not to overpay).

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

140) Does a shareholder have an insurable interest in the assets of a corporation?

Answer:  They do, even though they do not have a direct legal claim to them.

Diff: 3      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

141) What is the role of an adjuster?

Answer:  An adjuster values the loss for the insurance company after the insured-against event takes place.

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

142) What is the forfeiture rule?

Answer:  A criminal should not be permitted to profit from a crime. The principle also extends to those who claim through the criminal’s estate.

Diff: 3      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

143) In order for an insurance agreement not to be declared void as an illegal contract, what must be demonstrated?

Answer:  That the insured has an insurable interest in the property or matter being insured.

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

 

 

144) Explain what is meant by an insurable interest.

Answer:  An insurable interest is an interest that the insured has in the property or matter being insured, such that if the insured against event takes place, he will suffer a loss, resulting in the insurance payment compensating him for a loss (indemnity) rather than being a windfall profit.

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge

145) Explain what is meant by bonding.

Answer:  Bonding is when a person dealing with another person or company can be assured that they will be compensated if that person or company fails to properly perform their obligations. But note that the person or company that has acted wrongfully will still be required to repay the bonding company if possible, so bonding is quite different from insurance.

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

146) Distinguish between a fidelity bond and a surety bond.

Answer:  A fidelity bond involves a person or an employee being bonded against his own wrongful conduct for actions such as theft. A surety bond is intended to provide assurance that one party to a contract will properly perform their side of the contract, for example, a contractor on a construction project.

Diff: 3      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 12. Identify the duties imposed on the insured and the insurer.

Bloom’s Taxonomy:  Knowledge

 

 

147) Explain what must be established in order to succeed in a negligence action.

Answer:  Here the students are expected to outline the elements that must be present for negligence. They should show that a duty of care exists, explaining reasonable foreseeability and the qualification from the Anns case. They should explain how to determine the standard applicable. This is the reasonable person test, and they should indicate that it is the reasonable person in the circumstances (i.e., reasonable doctor, etc.). The action must show that the conduct of the defendant fell below this standard and caused the injury complained of. Whether the damage was caused by the conduct complained of is determined by applying the “but for” test. The injury or damage that resulted now includes emotional and economic injury, in addition to physical injury. Students should also note the effect of contributory negligence and voluntarily assuming the risk. They can also deal with the problem of remoteness.

Diff: 1      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 1. Identify the four elements of a negligence claim.

Bloom’s Taxonomy:  Knowledge

148) Indicate why the Donoghue v. Stevenson case (the snail in the ginger beer bottle) was so important in the development of negligence law.

Answer:  Here students should display an understanding of what happened in the case and should explain how the reasonable foreseeability test was developed. The concept of a duty owed to your neighbour was modified so that you owed a duty to take steps not to injure anyone you could anticipate might be harmed by your actions. Good students will also discuss how the case expanded the law, particularly with respect to product liability.

Diff: 2      Type: ES      Page Ref: 135

Topic:  Ch. 5 – Negligence

Skill:  Applied

Objective:  Chapter 5: 2. State when a duty of care arises, explaining how courts determine whether it is owed.

Bloom’s Taxonomy:  Knowledge

 

149) Discuss how legislation has impacted in the field of negligence.

Answer:  Here students would be expected to give some examples of legislation that has specifically modified the law of negligence, and how this was done. In the process, students should demonstrate an understanding of the law as it was and indicate how the statute changed those rules. Some examples would be the Occupiers’ Liability Act, the Contributory Negligence Act, the Innkeepers Act, and depending on what point in the course this was asked, they might deal with statutes placing duties on directors, partners, merchants, etc.

Diff: 2      Type: ES      Page Ref: 154

Topic:  Ch. 5 – Legislation Impacting Duty of Care

Skill:  Applied

Objective:  Chapter 5: 6. Examine legislation that affects when liability may be imposed.

Bloom’s Taxonomy:  Knowledge

 

 

150) Discuss the development of legal liability for negligent misstatement and how and why the approach to negligent misstatement differs from the approach to negligent conduct.

Answer:  Here students are expected to demonstrate an understanding of how the law with respect to negligent words has developed differently from negligent conduct. This should lead to a discussion of Donoghue v. Stevenson and how the reasonable foreseeability test for determining duty that developed in that case related to conduct not words. Negligent words were initially thought not actionable, but that was changed in England and then in Canada (Haig v. Bamford). Students should show that they understand that the test to determine a person’s responsibility for their careless conduct, as developed in these cases, was different from the test to determine whether a person was responsible for their careless words. Finally they should talk about the Anns case and how this can be applied so that the system is brought together. The second part of the Anns case test is applied to words and the duty reduced, etc. (as was demonstrated in the Hercules case).

Diff: 3      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

151) Explain the potential liability faced by professionals and how the risks associated with such liability can be minimized.

Answer:  Here students are expected to discuss professional liability related to contract, negligence, and fiduciary duties. In the area of contractual duties, students should note, at a minimum, that a professional is expected to provide a reasonable level of performance. In discussing tort liability, students should identify that the standard is that of a reasonable member of the profession. (Good students will note that common practice may not measure up to the reasonable standard.) When a person places trust in a professional, the professional has a fiduciary obligation to act in the client’s best interests.

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

 

152) Explain the role of self-governing professional bodies, including a discussion of their disciplinary function.

Answer:  Examples of self-governing professional bodies include the Law Society, Medical Association, the Teachers’ Association, and the Chartered Professional Accountants association. Typically, these bodies have varying degrees of control over the relevant practice. This can extend to granting licences, determining membership, setting standards of conduct, setting educational qualifications and continuing training requirements, and disciplinary matters. The disciplinary process may vary, but whatever process is used must adhere to the rules of procedural fairness or the decision will be subject to judicial review. In particular, a fair hearing is required. The Charter may apply and compliance with human rights statutes is necessary. The penalties that such bodies may impose are usually limited to fines, suspension, or expulsion.

Diff: 2      Type: ES      Page Ref: 163

Topic:  Ch. 5 – Liability of Professionals and Other Experts

Skill:  Applied

Objective:  Chapter 5: 8. Describe the circumstances where professional liability may arise.

Bloom’s Taxonomy:  Knowledge

 

153) Discuss the role of insurance, especially compulsory insurance, and how it relates to tort law.

Answer:  This is a little more difficult, requiring that students understand that tort law is based on finding one party at fault and requiring that party to pay the damages. Insurance, on the other hand, is based on the principle of sharing the risk. Students should discuss the disadvantage of torts placing overwhelming and ruinous financial liability on one party, and how insurance can help to avoid that outcome. This leads to some compulsory insurance, such as for motor vehicles, and the introduction of no-fault systems. Students could also discuss the requirement of insurance for professionals.

Diff: 2      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

154) With respect to limitation clauses in standard form insurance contracts, on what basis do the courts typically interpret clause ambiguity?

Answer:  Insurance contracts take a standard fixed form and often contain limitation clauses favouring the insurer. Where there is ambiguity in the meaning of such clauses the contra proferentum rule allows the court to choose an interpretation that favours the insured. Coverage will be broadly construed while exclusions will be narrowly interpreted. Thus courts will apply an interpretation that favours the insured since it was the insurer that chose the language to use.

Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Diff: 1      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Recall

Objective:  Chapter 5: 9. Describe the four types of insurance businesses commonly need.

Bloom’s Taxonomy:  Knowledge

 

 

155) Explain what is meant by an insurable interest and what impact the existence of this principle has on the right to collect on an insurance claim.

Answer:  One of the most important aspects of insurance law is the requirement that the person taking out insurance have an insurable interest in the thing insured. The insurable interest requirement is simply that the person purchasing insurance coverage will lose something if the insured-against event happens. There is no windfall to the person taking out the insurance; rather, there is simply compensation for a loss. If you could insure something you didn’t have an interest in, such as your neighbour’s house, you could get a windfall, and it would be like gambling.

Where life insurance is involved, the extent of the interest is assumed to be the amount of insurance coverage purchased. With a relative, the presence of an insurable interest is clear, but with others, permission is normally needed. Often the life of key employees or the principal of the business will be insured to cover against the loss to the business were that key employee to die suddenly.

Diff: 3      Type: ES      Page Ref: 172

Topic:  Ch. 5 – Insurance

Skill:  Applied

Objective:  Chapter 5: 10. Identify when an insurable interest exists.

Bloom’s Taxonomy:  Knowledge