Complete all exercises with at least 50% of them using the engaged format. The guidelines are:

·         Show you understand the point of the exercise.

·         Add a little something to it.

·         Choose either the basic or engaged format for each exercise.

Question: What are examples of a speculative risk not named in the book?

Basic Format Answer A speculative risk exists when we have the possibility of a loss along with the chance to make a profit. Examples are betting on horse races, buying stocks and bonds, and real estate investment. This differs from a pure risk where only a loss is possible.

Engaged Format Answer

Since we know pure risk occurs when loss is the only possible outcome, there is no beneficial result. Pure risk is related to events that are beyond the risk-taker's control and, therefore, a person cannot consciously take on pure risk.

            An example is the possibility a person's house will be destroyed due to a natural disaster. In this case, it is unlikely there would be any potential benefit to this risk.

            There are products that can be purchased to mitigate pure risk. For example, flood insurance can be used to protect homeowners from the risk that their homes will be destroyed by an overflowing river.

            Other examples of pure risk events include premature death, identity theft, and career-ending disabilities.

Exercises 9. Legal and Contractual Liability

9-1. Why do insurance companies make a distinction between general liability and professional liability? Be specific.

The companies want to ensure the customers get what each policy covers without confusion. General liability covers lawsuits from any third party while professional liability covers suit about professionalism.

9-2. The majority of legal liability claims involves torts. With all the contracts that are written in the U.S., why do you think this is the case? Be specific.

9-3. A doctor told a patient that she needed surgery and she agreed. As part of the preparation she signed several papers. One of them gave the doctor permission to perform the operation. The other waived her right to sue if the operation did not produce the desired result. The operation was a failure, leaving her in a slightly worse state than before the surgery. She sued the hospital and doctor for negligence. Is she likely to win the lawsuit? Explain your reasoning.

9-4. A store owner signed a contract authorizing a building contractor to renovate his facility located in a seaside resort. After a hurricane damaged neighboring buildings, tourists stopped visiting the town. The owner told the contractor not to start the renovation. The builder sued for breach of contract to compel performance or accept money? If you were the judge, how would you rule? Explain your reasoning.

9-5. Some people think a formal contract lasts forever. Do you agree? Explain your reasoning.

9-6. An individual made the statement, “I do not worry about enforcement of my contracts. I just want to get them done.” What advice would you give that person in light of risk management for contractual liability?

9-7. The story of cardboard in China shows the limits of enforcing contracts in many areas of the world. Does this mean insurance companies should not issue insurance policies guaranteeing contract performance for operations outside the United States? Explain your reasoning.

Exercises 10. Tort Liability and Negligence

10-1. Suppose a man told you that a woman accused him of stealing property and as a result the company fired him. He is suing the woman for the misbehavior. The man asked you for advice on how to win the lawsuit. What would you tell him? Be specific.

10-2. An accountant made a mistake on a tax return producing penalties for a client. The accountant has general liability insurance but does not have coverage for a professional tort. Does he have coverage for any damages? Explain your reasoning.

10-3. The chapter contains stories of frivolous lawsuits with rock-paper-scissors and a lawsuit against God. Does the ability of people to file such lawsuits cause problems for insurance underwriters? Explain your reasoning.

10-4. Carnival Cruise Lines had a breakdown on the Carnival Triumph in 2013. A fire in the engine room stranded the vessel and 3,000 passengers at sea for five days. Passengers told horror stories of sewage odors, long lines for meals, and sleeping on deck to get out of the hot bedrooms. vessel. Lawsuits were filed alleging negligence. Use Internet research to understand more details. Do you think Carnival was negligent? Be sure to include the steps to prove negligence to make your case.

10-5. A group of tourists hired a ski touring company to take them skiing in the backcountry of Colorado. They requested “the ultimate skiing trip, certified they were excellent skiers, refused to carry all the equipment recommended by the ski touring company, and waived company responsibility for skiing accidents. Late one day, they went down a particularly dangerous trail after the ski instructor advised against it. Six of the 14 members had serious injuries and had to be carried by helicopter to a hospital. The group sued the touring company alleging negligence. What defenses can be raised by the company?

10-6. A man planned a birthday party in home. He paid Clowning Around Entertainment to set up an inflatable bull that could be put into motion to give riders the thrill of a rodeo experience. The company placed six-inch thick pads on the floor surrounding the apparatus.  Riders signed a waiver of liability prior to boarding the bull. A rider was thrown from the bull, hitting his head against the head of another guest who was standing on the pads. Both men were hospitalized with serious internal bleeding. They sued the host of the party and the entertainment company for negligence. Was anyone negligent?

Exercises 11. General Liability Insurance

11-1. A CGL policy provides insurance to cover damages and the costs of defending against liability lawsuits. Do you think legal costs are more costly than judgments for damages? Explain your reasoning.

11-2. CGL policies cover liability claims in bodily injury, property damage, and personal or advertising Injury. Which of these categories poses the greatest chance of a large award to a plaintiff? Explain your reasoning.

11-3. A guest at a resort was struck by a golf cart driven by a guest of the resort. He required medical treatment. The hotel shuttle took him to the hospital. On the way, a car crashed into the van driven by a hotel employee. Both the guest and the driver were seriously injured. Both men recovered and filed lawsuits against the casino owner.  Does the casino’s commercial general liability policy cover the exposure? Explain your reasoning.

11-4. A carnival operator sold rides on a piece of equipment called “The Wild Ride. It malfunctioned and six people were serious injured. They sued the operator who then sued the manufacturer of the equipment. Both the operator and the manufacturer had CGL policies. Do the policies cover both organizations? Explain your reasoning.

11-5. A company has asked you if it should buy an occurrence or a claim-made CGL policy. What would you say? Be specific.

11-6. Assume you are the risk manager for a manufacturer of sports equipment. Your broker asks you how to define the term “occurrence” in your CGL policy. What would you say? Explain your reasoning.

11-7. Endorsements can be added to a claims-made CGL policy. If you were a risk manager, how would you decide whether to add such an endorsement? Explain your reasoning.

11-8. Do you believe that a triple trigger approach to determining insurance coverage is a sound philosophy for a judge? Explain your reasoning.

11-9. Given the categories of visitors to a premise, what strategy should be used to minimize losses under a CGL policy? Explain your reasoning.

11-10. Do an Internet search. Describe the current status of silicosis lawsuits. Has anyone bee charged with fraud?