Term Paper on "Negligence Law Tort"

Term Paper 7 pages (1838 words) Sources: 6 Style: Harvard

[EXCERPT] . . . .

Negligence Law

Part a in all likelihood, Giselle nor his employer will be liable to Monty for the advice he gave. Foremost, Giselle was giving his advice as a friend, not as a financial advisor and therefore was not acting in any official capacity. Second, Giselle never gave any specific advice about investing in Mercantile Bank, he merely gave a thumbs up and made the general statement that the interest cycle would not last for ever, which is true regardless of the events at Mercantile Bank. Third, Giselle is not in any way associated with Mercantile Bank and therefore had no reason to know of the company's financial condition.

In order to be found negligent, one has to show that the defendant:

Had a duty to conform to a specific standard of conduct for protection of the plaintiff against an unreasonable risk;

There was a breach of that duty by the defendant;

That the breach is the actual and proximate cause of the plaintiff's injury; and,

That the plaintiff experience damages.

In the case at hand it can generally be said that Monty has no legitimate claim for negligence against Giselle. Although Giselle is a financial advisor, he was meeting with Monty in the capacity of a friend, therefore there was no duty of care between the two friends. Without a duty of care, there can be no breach and therefore no negligence action against Giselle.

Monty's best claim would be to bring an action against Giselle for Negligent Misrepresentation. In order to prevail in such an action, Monty would have to show that Giselle's:

Misrepresentations were made in a business or professional capacity;

There was a breach of duty toward a Monty;

This breach was the cause for Monty to make the investment;

Monty was justified in relying on the advice; and, 5) His reliance caused damages to Monty.

Monty's claim would most likely fail in several of these elements. First, it would be difficult for him to show that a casual question and answer at a non-business luncheon qualifies as acting in one's business or professional capacity. Unless there is a contract between Giselle and Monty, a business relationship will be difficult to prove. Without this relationship there can be no breach of duty, regardless of whether the advice was the cause of Monty's actions. Finally, there is a legitimate question as to damages. As of now, Monty has not lost any money, they are just frozen. Without an actual financial loss, there really is no claim for damages.

Monty could also bring an action for negligent infliction of emotional distress. To successfully bring such an action against Giselle, Monty would need to show that Giselle created a foreseeable risk to Monty by either causing a threat of physical impact that leads to emotional distress or directly causing severe emotional distress that by itself is likely to result in physical symptoms. Monty's injury would be the severe depression he suffered as a result of placing his savings with Mercantile Bank based on Giselle's advice. However, because there are no physical injuries and because the crash of Mercantile Bank was not reasonable foreseeable, Monty will not be able to establish the necessary elements of duty to care and damages against Giselle. For this reason, his action would fail.

Monty could also bring an action against Giselle's employer under the theory of vicarious liability. In order to be held liable for Giselle's actions, it would have to be shown that Giselle was both negligent in his actions and that his negligence occurred during the scope of the employment relationship. Clearly, the first problem would arise with proving that Giselle's actions were negligent in the first place. If he was not negligent, then his employer cannot be held vicariously liable for them. Further, the facts imply that Giselle and Monty were together as friends for lunch. This would be indicative of the fact that Giselle was not acting in his employment relationship and therefore his employer cannot be held vicariously liable.

Monty's best claim would be to bring an action for intentional misrepresentation against Mercantile Bank. In order to have a prima facie cause of action for intentional misrepresentation, Monty would have to show:

That there was a misrepresentation of material fact;

Scienter, or that the defendant made a statement that they knew was false or that there was no legitimate basis for the statement;

Intent to induce the plaintiff to act in reliance upon the misrepresentation;

An actual reliance, or causation;

The reliance was justified; and,

Damages.

In the case at hand, Mercantile Bank advertised the excellent interest rates even when they knew of their financial problems which made it impossible for them to offer the rates. However, despite this knowledge, they used the advertisements to induce Monty and other patrons to rely on them. Monty did rely on it and, because the Mercantile Bank is an otherwise reputable organization, this reliance was justified. Finally, because Monty is prevented from having access to his money and investing it somewhere else, he is loosing interest and therefore has suffered damages.

It should be noted that Monty may have a claim against the government for their failure to properly monitor Mercantile Bank. However, in must jurisdictions the government would be immune from such an action.

Part B

In order to protect themselves from any potential liability, Giselle's employer should take out the following six types on insurance policies:

Business Insurance. Business insurance is a general policy that protects any business against any risk. Business insurance will protect Giselle's employer against basic risks, including liability for negligent misrepresentation.

Casualty Insurance. Casualty insurance will protect Giselle's employer against any accidents, not necessarily tied to any specific property. A typical casualty insurance polity will cover the losses that are the direct result of an unforeseen accident that makes one liable. Damages caused by a financial crash would be protected under such a policy.

Workers Compensation Insurance. Any employer will want to have a workers' compensation coverage plan. Workers compensation insurance covers liability for injuries to workers caused during and in the course of employment. For instance, if Morty came up and punched Giselle after learning of the Mercantile Bank's financial troubles, Giselle could not sue his employer as his employer's liability would be covered by its workers' compensation insurance policy.

Liability Insurance. Liability insurance is a broad policy that covers legal claims against the insured. Liability insurance policies offer protection in two way: as a legal defense in the event of a lawsuit brought against the policy holder and indemnification, or payment on behalf of the insured, if liability is found. In particular, Giselle's employer will want to obtain professional liability insurance (otherwise known as Errors and Omissions Insurance), which covers a service provider, such as a financial advisor, for claims brought against them that arise out of the negligent performance of their services.

Property Insurance. Giselle's employer may also want to consider purchasing a property insurance policy. Property insurance provides protection against any risks to the employer's property, including theft, water and fire damages.

Travel Insurance. As most financial advising institutions now operate in a large geographic area, their employees are required to travel on a frequent basis. This being the case, Giselle's employer may want to consider taking out a travel insurance policy, which would cover losses, including medical expenses and sometimes workers' compensation coverage, when an employee is traveling both domestically and abroad.

Part C

If perchance Giselle's employer were found liable for the damages caused to Monty as a result of Giselle's negligent misrepresentation, Giselle's employer would be required to make a liability insurance policy claim.

Most companies that are at any risks of being exposed to being sued by a third party for negligence will have a liability insurance policy. Liability insurance is part of a larger system of insurance that focuses on risk transference. The insurance carrier offer protection against specified risks in consideration for a prearranged premium. Under such a system, the liability insurance company offers protection to the company against third party claims. Whenever a claim is made, the insurance carrier will often exercise its right to defend the claim in order to determine fault.

In the case at hand, Giselle's employer will be sued for negligent misrepresentation. As this liability extends from an act that was not intentional, it will be covered by their liability insurance policy. When the suit is filed by Monty, a copy of the action will be served upon the defendants, in this case Giselle's employer and/or Giselle. Once served, Giselle's employer will notify their liability insurance carrier of the claim. The insurance carrier will then evaluate the claim and, based on their determination of its merits, either hire an attorney to file an answer or simply pay the settlement amount.

In the case at hand, as there is a clear question as to Giselle's liability, it is more likely than not the Giselle's employer's liability insurance company will exercise their right… READ MORE

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