Risk Management

Risk Management

Chapter 32

1. Fast Pizza hires college students who drive their own cars to deliver pizzas to customers. Fast Pizza is concerned that the company may be liable for damages caused by the company employees while they are driving their cars on company business. Identify a liability coverage form that Fast Pizza could purchase to deal with this exposure. Explain your answer.

2. You have opened a new motel with an attached restaurant and cocktail lounge. What are the risks that your business faces? What insurance coverages should you consider essential in your insurance program?

3. Joe Smith has been in the plumbing business as a sole proprietor for the past 35 years and is planning to retire. His insurance agent has told him that he should continue to carry Products and Completed Operations Liability coverage. Do you agree with the agent’s recommendation? Explain your answer.


Chapter 31

1. The Rocket Manufacturing Company insures its plant against loss by fire for $900,000, under a policy with an 80% coinsurance clause. At the time that a $600,000 loss takes place, it is determined that the building is worth $1,250,000. How much will the insurer pay? How much would be paid in the event of a total loss?

2. Ashley owns a retail shoe store that is insured for $120,000 under the Business Income (and Extra Expense) Coverage Form. Because of a fire, Ashley was forced to close the store for 3 months. Based on past and projected future earnings, Ashley expected the store to earn net income of $30,000 during the three-month shutdown period if the loss had not occurred. During the shutdown period, there were no revenues, and Ashley had continuing expenses of $10,000. How much will Ashley recover for the business income loss? Explain your answer.

3. Janet is the risk manager of Daily News, a daily publication in a highly competitive market. She wants to be certain that the newspaper will continue to be published if the company’s printing facilities are damaged or destroyed by a covered cause of loss. What type of insurance can Janet purchase to cover the added cost of continuing to print the paper after a physical damage loss has occurred? Explain your answer.


Chapter 39/30

1. Nathan traded in his 2005 Ford for a new model. Three weeks later, Nathan hits an oily spot in the road on his way to work and skidded into a parked car. The 2005 Ford was insured under the PAP with full coverage, including a $250 deductible for a collision loss. At the time of the accident, Nathan had not notified his insurer of the trade-in. the physical damage to the parked car was $8,000. Damage to Nathan’s new car was $5,000. Will Nathan’s PAP cover either or both of these losses? Explain your answer.

2. Jamison, age 18, lives at home and occasionally drives the car of his friend, Mary Lynn. Mary Lynn carries $300,000 of liability insurance on her car under a PAP. Jamison is also insured under his mother’s PAP, which provides $500,000 of liability coverage. Assume that Jamison has an accident while using Mary Lynn’s car and is found to be legally liable in the amount of $400,000. How much, if any, will each policy pay? Explain your answer.

3. Uninsured motorist coverage is one approach to the problem of uninsured drivers.

a. Explain the advantages of uninsured motorist coverage in meeting the problem of uninsured drivers

b. Explain the defects of uninsured motorists coverage as a technique for compensating people are insured by uninsured drivers

Discussion questions

Short answer


1-Identify and discuss the 4 primary coverages available in a homeowner’s policy


2-Identify & discuss the three major classes of loss associated with the ownership of an automobile. Choose one of the 4 coverages and discuss the coverages and exclusions of that specific coverage.


3-Identify and describe 3 of the major property losses that a business faces, and how commercial property insurance protects against those losses.


4-Identify several of the major General Liability Exposures and how Commercial General Liability Coverage protects against those exposures.

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