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CPCU 552 - Chapter 1 Questions and Correct
Answers
Loss exposure Ans: the possibility of experiencing a loss
Liability loss Ans: the money paid by a person or organization as
a result of a legal claim against that person or organization
Legal liability Ans: the legal obligation of one party to pay
damages to another party
Damages Ans: money paid by one party to another as
compensation for a loss or injury
Criminal law Ans: applies to acts that injure the state or society;
criminal liability exposures are not insurable
Civil law Ans: applies to acts that injure citizens
Tort Ans: a wrongful act or omission that invades a legally
protected right and is not a crime or a breach of contract
Negligence Ans: an unintentional tort in which the defendant (aka
the negligent person) failed to exercise the standard of care he
owed the plaintiff (aka the claimant)
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Intentional tort Ans: must involve intentional activity, but need
not involve intentional injury
Libel Ans: a written, false, public statement that results in the
plaintiff's loss of (damaged) reputation or esteem
Strict liability Ans: imposed on inherently dangerous, but socially
acceptable, activities
Absolute liability Ans: another term for strict liability
Contract Ans: a legally enforceable agreement between two or
more parties in which each party promises something to the other
Breach of contract Ans: involves failure to perform as voluntarily
promised
Warranty Ans: a promise made by a seller about its product
Hold harmless agreement (indemnity agreement) Ans: obligates
one party (the indemnitor) to pay certain losses (contractually
assumed) sustained by another party (the indemnitee)
Indemnity agreement Ans: another term for hold harmless
agreement
Contractual liability Ans: occurs when the indemnitor voluntarily
assumes another's liability
© 2025 All rights reserved
CPCU 552 - Chapter 1 Questions and Correct
Answers
Loss exposure Ans: the possibility of experiencing a loss
Liability loss Ans: the money paid by a person or organization as
a result of a legal claim against that person or organization
Legal liability Ans: the legal obligation of one party to pay
damages to another party
Damages Ans: money paid by one party to another as
compensation for a loss or injury
Criminal law Ans: applies to acts that injure the state or society;
criminal liability exposures are not insurable
Civil law Ans: applies to acts that injure citizens
Tort Ans: a wrongful act or omission that invades a legally
protected right and is not a crime or a breach of contract
Negligence Ans: an unintentional tort in which the defendant (aka
the negligent person) failed to exercise the standard of care he
owed the plaintiff (aka the claimant)
© 2025 All rights reserved
, 2 | Page
Intentional tort Ans: must involve intentional activity, but need
not involve intentional injury
Libel Ans: a written, false, public statement that results in the
plaintiff's loss of (damaged) reputation or esteem
Strict liability Ans: imposed on inherently dangerous, but socially
acceptable, activities
Absolute liability Ans: another term for strict liability
Contract Ans: a legally enforceable agreement between two or
more parties in which each party promises something to the other
Breach of contract Ans: involves failure to perform as voluntarily
promised
Warranty Ans: a promise made by a seller about its product
Hold harmless agreement (indemnity agreement) Ans: obligates
one party (the indemnitor) to pay certain losses (contractually
assumed) sustained by another party (the indemnitee)
Indemnity agreement Ans: another term for hold harmless
agreement
Contractual liability Ans: occurs when the indemnitor voluntarily
assumes another's liability
© 2025 All rights reserved
