Assignment 8 Questions

Jim's Computer Repair will often take customers' computers into the shop for repairs and service. While Jim has a customer's computer in his possession, he is in the role of A. A bailee. B. A bailor. C. A secured lender. D. An agent.

A. A bailee is a person who holds property entrusted to them by others.

The loss of or damage to property can have adverse financial consequences including reduced property value. Which one of the following statements is correct with respect to a reduction in value? A. A valuable painting that is repaired after being damaged is likely to have declined in value. B. For insurance purposes, the dollar amount of a reduction in value is the same regardless of the valuation measure used. C. If a cell phone is lost or stolen, its decline in value is measured as its replacement cost minus its salvage value. D. When property is lost or destroyed, the limit of insurance is deemed to be the amount of the reduction in value.

A. A valuable painting that is repaired after being damaged is likely to have declined in value is correct with respect to a reduction in value.

While Wanda was mowing her lawn, the lawn mower made a popping noise and suddenly exploded. Engine parts flew through the air and struck Wanda's grandfather in the eye. As a result of losing his vision, Wanda's grandfather, Homer, sued the lawnmower manufacturer. Homer's best approach in the lawsuit is to assert A. Strict liability. B. Intentional negligence. C. Imputed negligence. D. Breach of warranty.

A. Homer's best approach in the lawsuit is to assert strict liability

Which one of the following is a financial consequence of personnel losses to an organization? A. Losses to an organization's value caused by negative publicity B. Expenses of paying replacement employees more than departing employees C. Cost allocations relating to departing employees' benefit plans D. Costs of hiring new management personnel to manage a younger workforce

A. Losses to an organization's value caused by negative publicity is a financial consequence of personnel losses to an organization.

Which one of the following characteristics regarding kidnap and ransom are important for an international organization to consider in assessing personnel loss exposures? A. Low frequency but high severity B. High frequency but low severity C. Low frequency and low severity D. High frequency and high severity

A. Low frequency but high severity are important for an international organization to consider in assessing personnel loss exposures with regard to kidnap and ransom.

Net income losses can be caused by which one of the following? A. Increases in expenses B. Increases in revenue C. Decreases in expenses D. Decreases in hazard risks

A. Net income losses can be caused by increases in expenses.

The death of a shareholder in a close corporation is often a significant event for the corporation for which one of the following reasons? A. Ownership in a close corporation is typically concentrated in just the few major shareholders, most of whom are also managers. B. The death or disability of one of the shareholders generally results in payment of dividends to the remaining shareholders. C. Key shareholders are paid high salaries and are difficult to replace. D. Shareholders in a close corporation also serve on the board of directors resulting in a disparity of shareholder votes.

A. Ownership in a close corporation is typically concentrated in just the few major shareholders, most of whom are also managers.

Products liability loss exposures arise out of injuries or damage that result from an organization's A. Defective product. B. Operations away from premises. C. Types of bailments. D. Manufacturing operations.

A. Products liability loss exposures arise out of injuries or damage that result from an organization's defective product.

The branch of law that deals with the rights and responsibilities of citizens with respect to one another is A. Civil law. B. Constitutional law. C. Criminal law. D. Contract law.

A. The branch of law that deals with the rights and responsibilities of citizens with respect to one another is civil law.

When a business suffers loss of income following a liability suit that causes customers to lose confidence in the business' products, what type of loss has the business suffered? A. Damage to reputation B. Punitive damage C. Special damage D. Confidence loss

A. The type of loss that the business suffered is damage to reputation.

When property is lost or damaged, the value of the property is decreased. In addition to direct damage to the property, there could be indirect losses to the business. This latter type of loss is known as A. Net income losses. B. Deferred income. C. Historical income. D. Residual income losses.

A. This latter type of loss is known as net income losses.

A licensed electrician completes the job of rewiring a house and returns to his shop. With regard to this job, the electrician has a A. Completed operations loss exposure. B. Premises liability loss exposure. C. Business operations loss exposure. D. Professional liability loss exposure.

A. With regard to this job, the electrician has a completed operations loss exposure.

Which one of the following is an element of a loss exposure? A. The verification of risk B. A cause of loss C. The probability of a loss D. The occurrence of a loss

B. A cause of loss is an element of a loss exposure.

A promise made by a seller that a product is fit for a specific purpose is called a A. Guarantee. B. Warranty C. Seller's promise. D. Condition of sale.

B. A promise made by a seller that a product is fit for a specific purpose is called a warranty.

Although largely modified or restated in statues, tort law is still based mainly on A. Constitutional law. B. Common law. C. Contract law. D. Statutory law.

B. Although largely modified or restated in statues, tort law is still based mainly on common law.

Other than some type of merger, layoff, or organizational change, which one of the following is an example of a situation where an entire group of employees might leave an organization?A. When the economy is in a long term period of inflation B. When employees follow a manager to a new organization C. When statutes make it more attractive to pursue other career opportunities D. When an organization offers excessive compensation

B. An example of a situation where an entire group of employees might leave an organization, other than some type of merger, layoff, or organizational change, is when employees follow a manager to a new organization.

For property insurance purposes, wall-to-wall carpeting is typically considered to be part of the building because it A. Tends to depreciate in value along with the building. B. Is permanently attached to the building. C. Is readily visible. D. Is easy to value.

B. For property insurance purposes, wall-to-wall carpeting is typically considered to be part of the building because it is permanently attached to the building.

A court awarded damages to Bob for scarring on his face that resulted from an auto accident in which the other driver was at fault. In doing so, the court awarded A. Special damages. B. General damages. C. Punitive damages. D. Exemplary damages.

B. In doing so, the court awarded general damages.

All for-profit organizations are exposed to net income losses. Net income is defined as A. Total assets minus total liabilities. B. Total revenue minus total expenses. C. Total profit minus total expenses. D. Total income minus indirect losses.

B. Net income is defined as total revenue minus total expenses.

Other than for money, for what primary reasons or types of reasons would an internationally based American organization's employees be kidnapped or held for ransom? A. Cultural reasons B. Political reasons C. Microeconomic reasons D. Psychological reasons

B. Other than for money, a primary reason an internationally based American organization's employees might be kidnapped or held for ransom are political reasons.

In property insurance, the term "property in transit" refers to which one of the following? A. Owned property while located anywhere other than the insured location B. Property while being transported by trucks, cars, buses, trains, airplanes, and ships C. Property while being moved from one building to another at the insured location only D. Mobile equipment while moving under its own power from one work location to another

B. Property in transit" is property transported by trucks, cars, buses, trains, airplanes, and ships.

Josephine Redmond who is the sole proprietor of Dream Quilts, Inc., operates out of three branch offices with 17 employees. What happens to Josephine's business if she dies or retires? A. The business is divided among the employees. B. The business ceases to exist. C. The business is divided among the remaining partners. D. The disposition of the business must be resolved in a court of law.

B. The business ceases to exist.

Because attorneys, physicians, architects, and engineers are considered to be experts in their fields and are expected to perform accordingly, what liability exposure do they face if a client is injured when such an expert fails to exercise the appropriate standard of care? A. Completed operations B. Professional liability C. Business operations D. Products

B. The liability exposure they face if a client is injured is professional liability.

Manufacturer Tyler was in the welding business. Tyler tried to save money by "enhancing" the solder with an inferior product as well as thinning the welds. These practices led to defective welds which resulted in a collapse of the welds inflicting bodily injury on an individual. In a negligence case against Tyler, a plaintiff must prove that Tyler A. Intended harm. B. Failed to use reasonable care. C. Failed to warn of dangerous conditions. D. Materially misrepresented his product.

B. The plaintiff must prove that Tyler failed to use reasonable care.

While involuntary employee separations may expose an organization to additional liability loss exposures, such as wrongful termination accusations, they generally are not considered a personnel loss exposure because A. The organization may not have a risk management person measuring personnel exposures. B. The organization has determined that it is better off without that employee. C. The reasons for involuntary employee separations are too numerous and too varied to be measure with high accuracy. D. Employees leave organizations for non-business related reasons and therefore, are not considered a personnel loss.

B. They generally are not considered a personnel loss exposure because the organization has determined that it is better off without that employee.

What kind of liability exposure does a manufacturer face if it emits contaminants that cause environmental impairment? A. Premises B. Pollution C. Business operations D. Completed operations

B. This kind of liability exposure is pollution.

Angelina borrows money from the bank to purchase a house. The house serves as security for the loan. In this transaction, Angelina is the A. Secured creditor. B. Mortgagor. C. Bailor. D. Mortgagee.

B. When a person or business borrows money to buy a home or a building, the borrower is called a mortgagor.

An auto dealer's showroom is destroyed by fire, and the dealer has to temporarily rent an adjacent building to use as a showroom. This is an example of A. A reduction in value. B. Lost income. C. An extra expense. D. An altered condition.

C. Acquiring substitute property on a temporary basis to replace damaged property is an example of an extra expense.

Another term for cause of loss is A. Negative outcome. B. Exposure. C. Peril. D. Hazard.

C. Another term for cause of loss is peril.

Anyone who owns or occupies property has a A. Products liability loss exposure. B. Professional liability loss exposure. C. Premises liability loss exposure. D. Pollution liability loss exposure.

C. Anyone who owns or occupies property has a premises liability loss exposure.

Which one of the following best defines a hazard? A. The actual means by which property is damaged or destroyed B. Anything that shifts the burden of proof to the insurer C. Anything that increases the frequency or the severity of a loss D. An uninterrupted chain of events

C. Anything that increases the frequency or the severity of a loss is a hazard.

Buildings, investments, patents, and human resources are all examples of A. Causes of loss, or perils. B. Financial consequences of loss. C. Assets exposed to loss. D. Tangible and intangible hazards.

C. Buildings, investments, patents, and human resources are all examples of assets exposed to loss.

Contract law enables an injured party to seek recovery because another party has A. Failed to act in a prudent manner. B. Engaged in an inherently dangerous activity. C. Breached a duty voluntarily accepted in a contract. D. Challenged the provisions contained in a contract.

C. Contract law enables an injured party to seek recovery because another party has breached a duty voluntarily accepted in a contract.

What type of law applies to wrongful acts that society deems so harmful that government takes the responsibility for prosecuting wrongdoers? A. Civil law B. Constitutional law C. Criminal law D. Common law

C. Criminal law applies to wrongful acts that society deems so harmful that government takes the responsibility for prosecuting wrongdoers.

Damages awarded to pay surgeon's fees following an auto accident, are referred to as A. Punitive damages. B. General damages. C. Special damages. D. Surgical damages.

C. In this case, damages paid to surgeons are special damages.

The liability that someone could incur because of an inherently dangerous activity, such as building demolition, is called A. Nonretractable liability. B. Nontransferable liability. C. Strict liability. D. Compulsory liability.

C. In this situation, such as building demolition, is called strict liability.

To analyze the possible financial consequences of an income loss to his business, Joe estimates his normal revenue and expenses and compares them to his estimated revenue and expenses should a loss occur. Norm. Ops Post-Loss Rev $120,000 $0 Expns $70,000 $40,000 Net Inc. $50,000 ($40,000) Based on Joe's estimates, which one of the following represents his projected net income loss?

C. Joe's projected net income loss is $90,000—$50,000 minus ($40,000) equals $90,000.

When a newspaper's printing press is damaged, the company may spend extra money to have the newspaper printed on another company's press. The additional cost of printing the newspaper is an example of which one of the following? A. Reduction in value B. Lost income C. Extra expense D. Altered condition

C. The additional cost of printing the newspaper is an example of an extra expense.

The difference between an organization's total revenues and its total expenses is A. Operating profit. B. Net sales. C. Net income. D. Gross profit.

C. The difference between an organization's total revenues and its total expenses is net income.

A neighbor has sued Andy for property damage that is potentially covered under Andy's homeowners liability coverage. Even if this lawsuit is found to be groundless, Andy's insurer will still probably be obligated to pay A. Special damages. B. General damages C. Defense costs. D. Compensatory damages.

C. The insurer will still end up paying defense costs.

In the event of a serious auto accident, what type of law would determine who was at fault? A. Criminal law B. Constitutional law C. Common law D. Statutory law

C. The type of law that would determine who was at fault is common law.

Telephone Company installs fiber-optic cable using a trenching machine that digs a trench, buries the cable, fills in the trench, and reseeds, all in one pass. The trenching machine can install cable in a fifty-home neighborhood in one day. Soon after the trenching machine passes by, a member of the community steps on the trenched area, sinks in, and breaks his leg. This is an example of a liability loss exposure arising out of A. Premises. B. Products. C. Completed operations. D. Mobile equipment.

C. This is an example of a liability loss exposure arising out of completed operations.

Kid Smart manufacturing makes a line of childrens toys. The possibility that a child may be injured because of a defect in a Kid Smart toy is what type of liability loss exposure for this toy manufacturer? A. Business operations B. Completed operations C. Products D. Professional activities

C. This type of liability loss exposure for the toy manufacturer is products.

A company turnover rate well above company and industry averages could be a sign of A. Employee slacking. B. Financial problems that need to be addressed. C. Claims-consciousness. D. Personnel problems that need to be addressed.

D. A company turnover rate well above company and industry averages could be a sign of personnel problems that need to be addressed.

County Janitorial Service has contracted with local bars and taverns to clean their restrooms on a daily basis. County's greatest liability exposure is probably A. Liquor liability. B. Professional liability. C. Advertising liability. D. Completed operations.

D. County's greatest liability exposure is probably completed operations.

A building contractor uses lower grade materials than called for in the specifications for an office building. A year after the building was completed, a balcony collapses, injuring several employees and customers and causing damage to the building and contents. For the building construction company, this is an example of A. A premises liability exposure. B. An operations liability exposure. C. A products liability exposure. D. A completed operations liability exposure.

D. For the building construction company, this is an example of a completed operations liability exposure.

Which one of the following best identifies types of organizations that should be concerned with personnel loss exposures from a manager leaving for another organization? A. Sole proprietorships, but not corporations with separation of ownership and control B. Close corporations, but not sole proprietorships C. Sole proprietorships and close corporations, but not corporations with separation of ownership and control D. Sole proprietorships, close corporations, and corporations with separation of ownership and control

D. Sole proprietorships, close corporations, and corporations with separation of ownership and control should be concerned with personnel loss exposures from a manager leaving for another organization.

John was involved in a serious accident that included injuries to the other party, and charged with driving while intoxicated. The actions that are likely to be brought against John are A. Statutory and common. B. Civil and common. C. Constitutional and criminal. D. Civil and criminal.

D. The actions that are likely to be brought against John are civil and criminal.

Which one of the following statements is true regarding the financial consequences of loss? A. The financial consequences of any loss can be established immediately after the loss occurs. B. The financial consequences of a loss are independent of any hazards that may have contributed to the loss. C. The financial consequences of future losses cannot be predicted with any degree of certainty. D. The financial consequences depend on the type of loss exposure, the cause of loss, and the loss frequency and severity.

D. The financial consequences depend on the type of loss exposure, the cause of loss, and the loss frequency and severity.

Extra expenses are a common financial consequence of property losses. Which one of the following is an example of an extra expense? A. A fence worth $7,000 was damaged by a car, and the fence owner has to pay $2,000 to have the damage repaired. B. When a grocery store in a mall burns, other nearby stores have to close and lose revenue until the grocery store is repaired. C. Even though fire has made a building untenantable, the landlord must continue making mortgage and tax payments. D. When a family's house is damaged, the family must pay rent to live in a hotel temporarily.

D. When a family's house is damaged, the family must pay rent to live in a hotel temporarily is an example of extra expense.