Chapter 1-H: Cause and Loss

A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers, causing thousands of dollars in damage. What is the proximate cause of the loss? A. The power surge B. The automatic sprinkler system C. The electrical fire D. The water from the sprinklers

A. The power surge

Jane's shed burns to the ground during a tornado, when the high winds break a wall of the shed, knocking over a lantern inside. What is the proximate cause of the loss? A. Fire B. Wind C. The lantern D. Wall collapse

B. Wind

When record-breaking rainfall causes severe flooding in Janie's home town, Janie's rental property suffers extensive damage. Which of the following is an indirect loss? A. Janie must hire a contractor to reinforce a damaged retaining wall in the backyard of her rental unit. B. Janie's tenant has to replace his sofa that was damaged by the water. C. Janie loses a month of rental income when her tenant must move out while repairs are made to the home. D. Janie must pay to have the wood floors replaced in her rental unit.

C. Janie loses a month of rental income when her tenant must move out while repairs are made to the home.

Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home, causing extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel until the repairs are completed. Sam's car crashing into the house would be considered: A. a physical hazard. B. an out-of-pocket expense. C. an indirect loss. D. an occurrence.

D. an occurrence.

An "occurrence" is defined as: A. the likelihood of experiencing a loss. B. something that increases the chance of a loss. C. an insured item. D. an unexpected event that causes loss.

D. an unexpected event that causes loss.