Personal Insurance – Liability Exposure

Liability Exposure – Asset at Risk of Loss

Assets at risk

This is often referred to as asset exposed to loss. An asset exposed to loss is any tangible or intangible item of value owned by an individual or organization that is subject to a loss.


Liability risk of loss

For a liability loss exposure, the primary asset at risk of loss is money or financial holdings. The liable party will be required to pay cash or liquidate financial assets to pay for the damages caused to the injured party. The money paid to the liable party is called damages.

Damages are the amount of money paid by the liable party to the injured party to compensate the injured party for losses. There are three common types of damages:

  • General damages
  • Punitive damages
  • Special damages


General damages

General damage is the amount of money awarded by the court to compensate the injured party for non-quantifiable losses. This is a loss that cannot be easily measured, such as pain and suffering. Two common types of general damages:

  • Emotional distress – this is money awarded for emotional damage caused by an intangible loss. For example, Andy was gifted a watch from his deceased father. When the watch is stolen Andy suffers an emotional breakdown because the watch is irreplaceable.
  • Pain and suffering – this is money awarded for physical and mental anguish caused by the injury. For example, Jim is injured and paralyzed. He would be awarded general damages to compensate his suffering


Punitive damages

Punitive damage is money awarded to the plaintiff that does not directly relate to the injury. This amount of money is intended to punish the defendant for acting negligently. The purpose is to punish the defendant and discourage others from acting in a similar manner.

  • This is common in bad faith or outrageous lawsuits such as fraud or gross negligence.
  • For example, Alex caused an accident because he was driving 120 mph in a school zone. The court could award the injured party punitive damages to punish Alex for acting recklessly.


Special damages

Special damage is money awarded by the court to compensate the injured party for a specific quantifiable loss, paying the plaintiff a set amount of money. This is a specific cost such as the cost to repair a damaged home or the cost to reimburse the injured party for medical bills. This is paid when the amount owed to the plaintiff is easily quantifiable and results from the plaintiff’s injury.

  • Loss of income is an example of special damages. This is money awarded for lost income resulting from the tort, such as income lost when the plaintiff is unable to attend work.
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