Legal Liability and Risk Management Quiz

Test your knowledge on legal liability, risk management, insurance, and more with these 15 questions. Prepare for your business's legal challenges!

Practice Learn Test

Which of the following is NOT a type of legal liability?

Criminal liability

Contractual liability

Financial liability

Ethical liability

What is the primary goal of risk management in a business?

To eliminate all risks

To minimize the impact of potential risks

To ignore risks and focus on profits

To transfer all risks to a third party

Which of the following is NOT a risk management technique?

Risk avoidance

Risk transfer

Risk appreciation

Risk mitigation

What is the purpose of a waiver in legal terms?

To transfer all liability to the injured party

To nullify any potential lawsuits

To obtain consent for participation in a risky activity

To hold the injured party accountable for their own injuries

What is the primary purpose of an indemnification clause in a contract?

To limit the liability of one party

To void the contract in case of breach

To transfer all liability to one party

To ensure both parties share liability equally

Which legal doctrine holds a company responsible for the actions of its employees while they are acting within the scope of their employment?

Respondeat superior

Res ipsa loquitur

Proximate cause

Res judicata

What is the purpose of product liability laws?

To hold manufacturers responsible for defective products

To regulate the prices of products

To limit consumers' rights to sue

To encourage companies to produce cheaper products

Which type of insurance covers damages caused by the intentional wrongdoing of an employee?

General liability insurance

Errors and omissions insurance

Fidelity bond insurance

Product liability insurance

What is the statute of limitations?

A law that limits the amount of time to file a lawsuit

A law that extends the time to file a lawsuit

A law that only applies to criminal cases

A law that only applies to civil cases

#10

What is the difference between mediation and arbitration in dispute resolution?

Mediation involves a neutral third party making a decision, while arbitration involves negotiation between the parties.

Mediation is a voluntary process, while arbitration is mandatory.

Mediation is legally binding, while arbitration is not.

Mediation involves a neutral third party facilitating communication, while arbitration involves a neutral third party making a decision.

#11

Under which legal theory can a plaintiff recover damages even if they were partially responsible for their own injury?

Comparative negligence

Contributory negligence

Vicarious liability

Strict liability

#12

Which of the following is NOT typically covered under directors and officers (D&O) liability insurance?

Breach of fiduciary duty

Employment practices liability

Intentional torts

Product defects

#13

What is the 'prudent person' rule?

A legal standard requiring individuals to act with the care and skill that a reasonable person would exercise in similar circumstances

A legal principle stating that any risk is acceptable if the potential rewards are high enough

A doctrine that holds individuals responsible for all possible consequences of their actions

A rule that allows individuals to escape liability if they can prove they acted in good faith

#14

What is the difference between libel and slander?

Libel is spoken defamation, while slander is written defamation.

Libel is written defamation, while slander is spoken defamation.

Libel involves false statements about a person's character, while slander involves false statements about a person's reputation.

Libel occurs in public settings, while slander occurs in private settings.

#15

What is the role of the Securities and Exchange Commission (SEC) in risk management?

To regulate financial markets and protect investors

To enforce product safety standards

To provide insurance against financial losses

To oversee workplace safety regulations