What does a "legal hazard" increase the risk of?

A legal hazard refers to conditions within a legal environment that increase the likelihood of a loss occurring due to legal actions or litigation. This type of hazard can arise from various factors, such as the legal framework governing contracts, liability issues, regulatory frameworks, and litigation trends in a particular area. Essentially, a legal hazard signifies an elevated risk of financial impact stemming from lawsuits or other legal proceedings.

When assessing risks, particularly in insurance and underwriting, the existence of a legal hazard indicates that more claims could arise from legal disputes, which ultimately translate into potential losses for insurers. Thus, the risk of loss due to potential legal actions is indeed the primary concern associated with a legal hazard, making it the correct answer. This understanding is critical for adjusters, as it aids in evaluating claims and determining appropriate policy limits and coverage options while navigating the complexities of the legal landscape.