LOMA 311 Exam: Legal Concepts and Principles for Insurance Professionals, Exams of Business and Labour Law

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LOMA 311 EXAM {388} QUESTIONS WITH

VERIFIED ANSWERS

The Constitution - ANSWER establishes fundamental principles that dictate the powers and obligations of the government and the rights of citizens.

Statutes - ANSWER Laws passed by the legislative branch of government. Typically declares, commands, or prohibits something

Administrative Regulations - ANSWER Rules or orders issued by agencies under the executive branch of government (explain how to follow legislation). The Executive Branch is made up of various departments known as Administrative Agencies, which are in charge of implementing specific areas of the law.

Legislative Branch - ANSWER one or more legislative bodies that pass laws to regulate jurisdiction.

The Executive Branch - ANSWER is made up of several agencies or ministries that administer, enforce, and carry out the jurisdiction's laws.

Judicial Branch - ANSWER comprises systems of courts that apply and interpret laws.

Parliamentary Democracies - ANSWER: The legislative branch (parliament) has ultimate authority to make all laws - other countries, no USA

Federal System - ANSWER A federal government and several lower-level governments share power.

Code - ANSWER All laws passed by each legislative body are gathered and structured into a set of laws.

Administrative Law is made up of regulations, which are rules or orders issued by administrative agencies with the same force and effect as statutes.

Substantive laws establish, define, and control legal rights and duties.

Procedural Laws - ANSWER specify the means used to enforce substantive laws. Case types over which each court has authority.

Jurisdiction - ANSWER Geographical Area of Legal Authority

Common Law System - ANSWER: Based on English common law. Common Laws address issues based on local conventions. The courts established and followed an unwritten collection of broad legal concepts and regulations.

1. The court considers written law (statutes and regulations).
2. If no statutes or regulations apply, adopt the doctrine of stare decisis by following precedents.
3. If no precedents apply, then use general principles of common law.

Doctrine of Stare Decisis - ANSWER: When a court determines that a specific legal principle applies to a specific set of facts, that principle is applied to all future cases in which the facts are substantially the same. A precedent refers to a previous case's decision. The precedent remains in effect unless a court overturns it or a statute is adopted that alters the legal theory that underpins the precedent.

Civil Law System - ANSWER Based on the Roman legal system, laws are codified into written codes passed by the legislature. Civil Code-general legal concepts that govern interpersonal connections formed by birth, adoption, marriage, death, contracts, and personal liability. Decisions are made using the jurisdiction's codes for applicable norms of law. If no code covers the matter at hand, the court decides the question under the general principles of law established in the appropriate code.

1. The court looks to the applicable code.

• Controversies involving the United States
• Conflicts involving two or more states
• Conflicts between a state and people of another state
• Controversies among people of various states
• Disputes between inhabitants of the same state claiming territories under gifts from separate states
• Conflicts between a state and its international counterparts, citizens, or subjects.

Ethics is a set of accepted standards of behavior and moral judgment that incorporates elements of honesty, integrity, and fair treatment. Acting ethically entails maintaining promises to consumers, functioning responsibly, treating customers and employees fairly, and keeping confidential information private.

Corporate culture refers to the values, beliefs, goals, and behavioral patterns that an organization's employees share.

Civil laws are concerned with private, non-governmental rights and remedies.

Public law refers to areas of law that influence the public interest and control relationships between government and non-government entities.

Private law refers to areas of law that largely involve disputes between non-governmental parties.

Civil Litigation - A judicial process in which private parties go to court to enforce legal rights or seek redress for a civil wrong.

Cause of Action – ANSWER group of facts that entitles a person to judicial remedy. When: one person has a legal right, another person has a legal obligation to protect that right, the second person violates her legal duty, and the first person suffers a loss or injury as a result of that breach. All four must be present to form a cause of action.

ANSWER 1) Breach of contract - a party's failure to perform a contractual duty.

2. Tort is a private harm for which the law gives a remedy to the wronged party.

Affirmative Defense - ANSWER an assertion of facts that constitute a defense to a plaintiff's claim - part of the pleading stage of civil litigation

Counterclaim - ANSWER a claim by defendant against plaintiff that comes out of the identical facts plaintiff's claim is founded on, part of the Pleading Stage of Civil Litigation procedure.

Interrogatories are written questions that one party prepares and the other party must respond to within a certain time frame. Answers are in the form of an affidavit, which is made under oath. Discover technique in the discovery phase of the civil litigation procedure.

Deposition - ANSWER: Parties and witnesses are questioned by attorneys and testify under oath. Made under oath. Discover technique in the discovery phase of the civil litigation procedure.

Presumption - A legal rule in which one fact is presumed to be true because another fact has been demonstrated.

Conclusive presupposition – Respond to a presupposition that cannot be contradicted. Law has extremely few (children under a certain age cannot be charged with certain crimes).

Rebuttable Presumption - ANSWER can be disproven but remains valid until sufficient evidence is shown to the contrary.

Conflict of Laws is the area of law that determines which substantive laws apply to each issue when there are numerous jurisdictions. Courts make these determinations depending on the procedural procedures of each jurisdiction.

A judgment is an official decision of a court that resolves a dispute and establishes the rights and obligations of the parties to the case. Has the factfinder's verdict.

Res Judicata is a judicial theory that indicates that a case has been decided. Ensure that parties do not relitigate matters that have already been determined by the courts.

Tort Law - ANSWER focuses on paying victims rather than penalizing wrongdoers. Individuals who breach a legal duty owed to another person and cause them financial injury are accountable for the injured person's losses.

Intentional Torts – ANSWER a private harm perpetrated by someone who meant to do something that the law defines as wrong. Wrongs against another person or their

property. Assault (threat to hurt), battering (physical violence), defamation (injury to name or reputation-slander and libel), fraudulent misrepresentation (knowingly making false statements with purpose to harm), and breach of contract are all acts against a person. Trespass (unauthorized invasion of another's land) and conversion (unauthorized exercise of power and control over another's property, such as theft or embezzlement) are examples of property crimes.

Negligence is a private wrong done by a person who does not exert the legally requisite degree of care in doing something otherwise legal or omitting to perform something that is otherwise legally required. Plaintiff must prove that the defendant had a legal responsibility to act in accordance with a prescribed standard of care, that the defendant breached that duty, that the plaintiff suffered a loss, and that the defendant's behavior was the cause of plaintiff's loss.

Contributory fault - ANSWER: Plaintiff's fault contributed to loss.

Comparative Negligence - ANSWER permits plaintiff who was contributorily negligent to recover from defendant; however, the amount of recovery is reduced in proportion to plaintiff's responsibility.

Assumption of danger - ANSWER completely precludes plaintiff's claim where plaintiff understands the extent of the danger posed by defendant's behavior and voluntarily accepts that risk.

Strict Liability – ANSWER liability regardless of whether the defendant is at fault. Only used in very specific instances (hazardous activities involving TNT blasting).

Legal Remedies: ANSWER strict, formal, limited, and precise remedies. Involved in paying money damages.

Statutory Damages - In civil litigation, damages are assessed by statutory requirements rather than common law criteria.

Remote damages, which are not awarded in civil lawsuits, are damages for losses that the defendant could not reasonably have anticipated occurring from a given set of events. Only for losses that a reasonable person in defendant's situation could have predicted would come from defendant's acts.

Speculative Damages - ANSWER: not civil actions - damages may occur in the future as a result of the defendant's actions, but they are dependent on the occurrence of other uncertain contingencies.

Reformation – ANSWER equitable remedy in which a written contract is revised to express the underlying agreement between the contractual parties.

Rescission is an equitable remedy in which a contract is revoked and the parties return to their positions as if no contract had been made.

Specific Performance - ANSWER Equitable remedy demands the breached party to carry out the contract in accordance with its provisions.

Restitution is a legal and/or equitable remedy in which a party is ordered to restore property to the owner or the person who is entitled to it. The purpose is to avoid unjust enrichment and profit from wrongdoing.

Mediation - An unbiased third party (mediator) promotes conversations between parties to reach a mutually acceptable outcome.

Arbitration - ANSWER An unbiased third party (arbitrators) evaluates the facts in dispute and makes a legally enforceable conclusion.

Sole proprietorships are businesses owned and operated by a single person. Starting a sole proprietorship does not involve any government intervention. You may be needed to obtain a municipal business license or permit. Responsible for all debts and profits. Creditors can sue the proprietor personally and get a judgment against the individual. Proprietors file individual tax returns; sole proprietorships are not taxed as legal entities.

Partnerships are formed when two or more persons, known as partners, agree to own and operate a business for profit. The partnership agreement (oral or written) oversees operations. State laws may govern certain parts of functioning. No government action is required to create a local business license or permit. Partners share profits and bear unlimited personal accountability for debts. Not taxed as a formal organization, each partner reports profits on their individual tax returns.

General Partnerships - ANSWER: All participants bear unlimited personal liability for partnership obligations.

Limited Partnership - ANSWER: One or more partners are accountable for running the business and have unlimited personal liability for debts, whereas one or more limited partners invest in the business but are not involved in its operation.

Close Corporation – ANSWER issued stock that is owned by a small group of persons (typically members of the same family) and is not for sale to the public.

The Articles of Incorporation - ANSWER define some of the key aspects of a corporation. Include the names and addresses of the incorporators, the name of the proposed corporation, the street address of the corporation, the name of the registered agent at the address, and the quantity of stock shares that the corporation is permitted to issue.

Bylaws - ANSWER basic rules under which the corporation functions.

Directors are those appointed or elected by stockholders to handle their business. They may be criminally accountable if they violate their fiduciary duties.

Inside Directors: ANSWER directors who work for the corporation or are major stockholders.

ANSWER: Outside directors are not employed or have a major direct interest in the corporation. Directors have a duty of loyalty and good faith, and they must use reasonable care when carrying out their responsibilities.

Officers - ANSWER are those who are in charge of performing critical management duties for the corporation's day-to-day operations. Are fiduciaries required to behave in the best interests of the corporation and stockholders? Employees of a corporation typically engage into contracts. If you breach your duties and obligations to the corporation, you may be held personally accountable. often not provided protection under the business judgment rule.

The Business Judgment Rule - ANSWER provides that directors cannot be held personally accountable for making business decisions if there is a reasonable basis to believe they acted in good faith and with due care.

Stockholders - ANSWER have complete control over corporate management since they elect the board of directors. You also have the right to inspect the corporation's financial records, attend annual stockholder meetings, vote on certain corporate affairs, and share in the corporation's profits when dividends are issued. If unable to attend the meeting, you can vote via proxy.

Common stock - ANSWER allows the owner to a share of the corporation's dividends and the power to vote on corporate matters.

Preferred investors have the first right to receive dividends (prior to common stockholders), do not have the right to vote on the board of directors, but can vote on specific items (sale of corp assets), and have priority over corp assets if the business is dissolved and creditors have been paid.

Cumulative Preferred Stock - ANSWER mandates the issuing corporation to pay all declared but unpaid dividends that have accumulated over time before any dividends can be given to common stockholders.

Noncumulative Preferred Stock - The issuing corporation must pay only currently declared dividends before being able to pay common stock dividends.

fails to file required reports, pay taxes and fees, or establish and retain a registered agent in the state.

Liquidation - A dissolved corporation pays its obligations or makes preparations to pay them. If any assets remain, they will be allocated on a pro rata basis to the corporation's stakeholders, with preferred stockholders taking precedence over regular shareholders.

A multinational corporation is one that operates in multiple countries and takes important operational choices in a global setting. Face unique compliance issues: 1) comply with laws and regulations in their home country, 2) comply with laws and regulations in each place where they do business, and 3) be affected by international laws (treaties).

General Agreement on Trade in Services (GATS) - ANSWER encourages the worldwide flow of services: 1. Services provided across borders 2. Consumption of services in another country 3. Setting up a commercial presence in another country

4. Individuals move from one country to another to perform services.

Economics is the study of how societies distribute resources.

ANSWER uses market forces such as supply and demand to allocate resources. The US economy

Market - a setting in which buyers and sellers of a product or service interact. Supply reflects the amount of goods and services that producers are willing and able to give to the market. Demand measures consumers' willingness and ability to buy products and services at a specific price.

Pure Competition - ANSWER: Many producers and consumers of products and prices are determined by market forces, with no influence from outside economic factors.

Monopoly - A situation in which one or more corporations control the production and distribution of a product. No competition. In actuality, it falls midway between pure competition and monopoly.

The Sherman Act - ANSWER bans individuals and businesses from monopolizing or participating in contracts, combinations, or conspiracies to restrict trade.

The Clayton Act - ANSWER prohibits certain conduct that are thought to reduce competition and lead to monopolies.

Federal Trade Commission Act The ANSWER empowered the Federal Trade Commission to enforce federal antitrust laws.

Per se Violations – ANSWER damaging behaviors to consumers that are assumed to breach antitrust rules (price fixing, rib bids, market division by client allocation).

Unfair Price Discrimination - ANSWER The seller agrees to offer items to a buyer at a lower price than other buyers in similar circumstances. Prohibited if used unjustly against competitors.

ANSWER prohibits misleading and unfair sales activities and provides customers with fair and truthful information about consumer goods and services.

Prohibit false, fraudulent, and misleading advertising - ANSWER protects consumers by ensuring that commercials are truthful and understandable to the typical individual.

The Consumer Credit Protection Act - ANSWER governs how businesses give credit to consumers in the United States. Creditors must: 1) offer consumers with specified written information regarding all finance charges; 2) comply to prohibitions on garnishment of debtor's wages; and 3) refrain from discrimination when extending credit.

The Fair Credit Reporting Act (FCRA) - ANSWER governs the reporting and use of consumer credit information, with the goal of ensuring that consumer credit reports contain only accurate, relevant, and recent information. Consumer Reporting Agencies (private enterprises that collect or assess consumer information and provide consumer credit reports to third parties for a charge) and third parties (banks, insurance companies) who receive consumer credit reports are regulated.

Adverse Action - ANSWER denial or revocation of credit or insurance coverage, a modification of an existing credit arrangement or insurance coverage, or reluctance to award credit or insurance in the requested amount.

The Electronic Signatures in Global and National Commerce Act (E-SIGN) - ANSWER removes legal barriers to using electronic technology to create and sign contracts, gather and store documents, and send and receive alerts and disclosures. Applies to commercial, consumer, and corporate transactions affecting interstate or foreign commerce, as well as transactions controlled by the federal and state governments.

Uniform Electronic Transactions Act (UETA) – ANSWER modal law enacted to ensure the effectiveness of electronic signatures.

US Safe Harbor - Notice - ANSWER Organizations must warn individuals about the objectives for which they acquire and use personal information.

US Safe Harbor - Choice - ANSWER Organizations must provide individuals the ability to select whether their personal information will be disclosed to a third party.

US Safe Harbor - Onward Transfer - ANSWER Organizations must use the notice and choice principles.

US Safe Harbor - Access - ANSWER Individuals must have access to personal information held by an organization and be able to correct, update, or delete it if it is erroneous.

US Safe Harbor - Security - ANSWER Organizations must take reasonable steps to safeguard personal information against loss, misuse, unauthorized access, disclosure, modification, and destruction.

US Safe Harbor - Data Integrity - ANSWER: Personal information must be relevant to the purposes for which it will be used.

US Safe Harbor - Enforcement - ANSWER procedures to ensure that corporations follow safe harbor principles, requirements to resolve difficulties, and recourse methods for complaints and disputes.