03.04. Valuation of Liability Claims

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03.04. Valuation of Liability Claims
2013-03-19 19:01:24
Valuation Liability Claims

Valuation of Liability Claims
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  1. Most common liability valuation methods (lesser of)
    • compensable amount of the claim
    • applicable policy limit
  2. settlement of claim
    • (+) avoid uncertainty, time, and expense involved in format trial
    • out-of-court settlements: most common; insured usually has no right to prevent insurer to reach settlement within policy limits; insurer may settle even if likely to win, to avoid trial costs and setting up precedent in case of losing
    • court award: judge isn't bound by policy limits. If claim exceeds limits, insured usually has right to legal counsel at his own expense
  3. Extent of damages
    • estimating future expenses
    • burden of proof: usually on the claimant side; claimant has duty to mitigate loss
    • property damage: may repair / replace / recover damages to compensate loss of use
    • lost revenue
    • bodily injury: medical expense, wage loss, pain and suffering, disfigurement, etc. In case of death use either survival action (how much would the recovery be should the claimant be alive) or wrongful death action (monetary loss to survivors)
  4. Liability policy limits
    • may have one or multiple (aggregate, per occurrence, etc)
    • most policies include defense costs and supplementary payments (interest on judgement, court costs, etc.) as an extra on top of policy limits