As a Result of Dumping Toxic Materials into the Water

question 25

Multiple Choice

As a result of dumping toxic materials into the water supply, Acme Corp has been held liable under the tort of nuisance to several of its neighbours. While the company's directors are concerned about the bad publicity, they do take comfort in the fact that Acme holds a liability insurance policy that applies in this situation. Which of the following statements is TRUE?

• A) The doctrine of the duty to defend requires Acme to defend itself against its neighbour's claims in order to protect the insurance company from having to pay any money.
• B) A duty to defend exists under the insurance policy only if the directors are not liable for the nuisance.
• C) The insurance policy would have required the insurance company to pay for the costs associated with the lawsuits that were brought against the company.
• D) Because of the insurance policy, the deterrent effect of the court's judgment will be lessened.
• E) Because of the insurance policy, Acme's neighbours are entitled to be paid twice, once by Acme and again by the insurance company.

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Definitions:

Domestic Supply

The total amount of goods and services produced within a country that is available for purchase.

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The total demand for goods and services within a country's borders, excluding exports and including imports.

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The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its trading partners.

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