Transcript Negligence and Six different types of Liability Insurance

Mastering concept of
Negligence
Hong Kong Clinical Psychologists Association
Charterlloyd Insurance Brokers Ltd
Raymond Chow and Lewis Lam
Chartered Insurance Broker (UK)
Tel: 25236350
• - a city with rising legal litigation Each and Every businessman and
ordinary person worry about their
legal liability
Negligence
• Law of tort - civil wrong
• based on the principle that people must be
able to live on assumption that others will
respect their person and possessions
• both tort and contract are civil wrongs
• contractual parties vs any person
• European Bank has filed a claim for
HK$20 million against its investment
adviser and stock broker for giving
him inaccurate investment advise
which causes the bank financial loss.
Investment adviser recommends the
bank to hold a share when its value is
HK$2.5 per share. But the share
drops to HK$0.5 per share six
months after.
Negligence - Duty of
Care
• Not all careless acts or omissions
causing injury or damage give rise to
liability
• there is no liability - if a person
owes no duty to another
• duty of care - consists of four
necessary conditions
Duty of Care
• 1) defendant owes a duty of care to
another
• 2) defendant has breached that duty
• 3) breach of duty has, in fact, caused
injury or damage
• 4) injury or damage is not too remote
• (a foreseeable result of defendant’s
breach of duty)
• Peter, Paul and Mary buys three air
tickets flying to London at Four
Clouds Travel Agency. The airplane
explodes when it is flying.
• Will Four Clouds Travel Agency owe
the duty?
• Who will owe the duty?
Existence of duty of
care
• Donoghue vs Stevenson 1932
• laid down the “duty situations” where a
person owes a duty of care to another
• e.g. surgeons to their patients, lawyers to
their clients, insurance brokers or agents
to their insured, manufacturers to
consumers
• the rule laid down: “ you must not injure
your neighbour”
Who is neighbor?
• Question: who is my neighbor?
• A person must take reasonable care to
avoid acts or omissions which you can
reasonably foresee would be likely to
injure your neighbor
• a persons who is so closely and directly
affected by my act that I ought
reasonably to have them in contemplation
Neighbor Principle
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Three elements:
a) foreseeability of harm
b) proximity
c) fairness, justice and
reasonableness
Foreseeability
• Plaintiff must establish that he is
likely to be affected by the
defendant’s negligent act or omission
• duty is to avoid causing to the
particular plaintiff damage
• A man carrying the explosives gets
on the MTR to TST. He burns the
explosives during the journey and
causes twelve passengers suffered
injury.
• Will the MTR be liable?
• Will MTR foresee this?
• Who will be liable?
• A pregnant woman watches the TV
news reporting the tsunami. She
feels so scary and she suffers
miscarriage a week after.
• Will the TV station be liable?
Proximity
• foreseeability of harm does not lead
to a duty of care automatically, but
also a close and direct relationship of
proximity is required
• A man attempts to commit suicide
while in police custody. The man’s life
is saved but the brain suffers
permanent injury. He brings an action
against Police Commissioner alleging
that he fails to prevent him from
attempting to commit suicide
• Will police be liable?
Fairness, justice and
reasonableness
• In addition to foreseeability of harm and
proximity, elements of fairness, justice
and reasonableness are considered by
judge to determine existence of a duty of
care
• there is no duty of care if the court thinks
that it is not fair, just and reasonable to
impose a duty on the defendant
Policy Immunities
• To protect government departments
to carry out daily job
• e.g. police for crime, Commission for
Financial Institution for commercial
fraud
• H.K. Future Exchange / Stock
Exchange to stock investors
Duty of Care: Pure Economic
Loss caused by negligent act
• Original principle - economic loss not
consequent upon any physical injury or
damage to property shall not be entitled
to claim against wrongdoer in negligence
• a pure economic loss is not related to or
result from any physical injury or damage
• pure economic loss may be caused by a
negligent act or by a negligent statement
Pure economic loss resulted from
negligent statement
• Pure economic loss arising from
negligent act still cannot be
recovered
• economic loss caused by negligent
statement can be recovered provided that there is a duty of care
owed by maker of statement to
claimant
• What will the Uncle No. Eight case
be different if Uncle No. Eight is
your personal investment adviser
that he writes a report to you to
advise you to buy MTR shares.
• Considerations:
• What advice has Uncle No. Eight given to
you?
• What kind of information he relies on?
• Is there any careless mistake he has
committed in interpreting this information?
• Is there any other important information
he has missed in giving his advice
• It is unfair, unreasonable and unjust
to impose a duty of care on “Uncle
Seven” if his advice is broadcasting.
Tortious Liability for Negligent
Misrepresentation
• Hedley Byrne & Co Ltd v Heller &
Partnership Ltd 1963 - there is potential
liability for giving negligent advice
• the recipient of advice can recover his
pure economic losses from adviser in
absence of contractual relationship
provided that there is a special
relationship between adviser and advisee
or there is assumption of responsibility by
adviser
Existence of a special
relationship
• Mere giving of a negligent advice or
information does not create any
liability even if it is foreseeable that
such advice or information may cause
financial loss to others.
• Plaintiff must establish there exists
a “special relationship” between him
and the other party
• Judicial interpretations on this
“special relationship is confused and
is even conflicting in some court
cases
Proximity and voluntary assumption
of responsibility
• Where the advisers knows that his
advice will be communicated to
plaintiff and the advisee relies and
acts upon it and suffers loss, the
adviser will be liable for it
• test of proximity: Caparo Industries
plc V Dickman 1990
• Caparo Industries plc v Dickman
• held that:
• three criteria for imposing duty of
care:
• a) foreseeability of damage
• b) proximity of relationship between
plaintiff & defendant
• c) fair, just and reasonable
• Test of Proximity :
• whether adviser knows at time advice
is given that advice was required for
a purpose
• adviser knows that his advice will be
communicated to advisee
• adviser knows that his advice will be
relied on or acted on without
independent inquiry
• Advice has been acted on which
resulted in loss
• purpose of audited account for public
company is the informing
shareholders but not to enable
individual shareholders to buy shares
Yue Xiu Finance Co Ltd & Another
vs Dermot Agnew & Others
• Two firms of accountants prepared
and signed the statutory audit
reports for two companies. Audit
report stated that the companies had
a combined profit of HK$11 million.
However, the auditors failed to make
provision of HK$28 million of
doubtful debts so that a combined
loss of HK$17 million should have
incurred.
• Yue Xiu Finance relied on the audit
report to extend credit facilities to
these two companies. These two
companies broke in one year after and
Yue Xiu Finance could not recover the
loan.
• Whether the auditors owed to Yue
Xiu Finance a duty of care in respect
of audited accounts
• foreseeability and proximity
relationship
• The auditors prepared the audit
reports for shareholders
• it is foreseeable that banks or
finance company will rely on it
• however, the plaintiff must establish
a proximity relationship
• must prove reliance on a particular
transaction and relationship
• defendant did not owe any duty
Breach of duty
• Objective standard - test of reasonable
person
• plaintiff must prove that the defendant
has breach his duty by failing to measure
up to an reasonable standard
• a person breaches a duty of care if he fails
to do something which a reasonable person
would do or has done something which a
reasonable person would not have done
• Special standards are applied in case
of children and professional persons
• children - conform to the standard of
reasonable children of their age
• professional person - a higher
standard is expected of professionals
• in accordance with the standard of an
ordinary skilled person exercising to
have that skill
• Professional must measure up to the
standard required in those
professions
Defences to Negligence
• 1) Contributory negligence
• where the plaintiff’s injury has been
caused partly by defendant’s fault and
partly by his own
• S 21 Law Amendment & Reform
(Consolidation) Ordinance
• plaintiff’s fault should be taken into
account to determine the damages that the
plaintiff will be awarded
• 2) Volenti Non Fit Injuria (voluntarily
acceptance of risk)
• the defendant can establish that plaintiff
has expressly or impliedly agreed to take
risk that materializes in injury
• plaintiff cannot claim any damages because
of doctrine of volenti non fir injuria
• a complete defense
• e.g. boxing game, surgical operation
• To succeed in defense, defendant
must establish plaintiff is aware of
risk and had freely agreed to taking
it
• 3) Exclusion of liability - Control of
exemption clause Ordinance - cannot
exclude bodily injury or death
• 4) Illegality
• requires court to examine all
circumstances: the nature of illegality
complained of, the moral and criminal
culpability and plaintiff’s conduct, casual
connection between defendant’s
negligence & illegality
• Public Conscience Test
• Joint criminal enterprise - no standard of
care test
• 5) Limitation period
• basic period: 6 years (property damage)
• 3 years (bodily injury) from
• injury was significant, injury was
attributable to negligence, identification
of defendant
Professional Liability Insurance
designed for you
• Cover: your professional negligence in
acting out as a clinical psychologist
• Limit: HK$10 million per incident and
HK$20 million for all claims shared among
all insured members (including legal
expenses)
• Insurance Company: Allianz Insurance
Hong Kong Ltd (the top three global
insurer)