UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGNCollege of Commerce and Business Administration D E P A R T M E N T O F F I N A N C EFinance 341Assignment 6Spring, 2002 Due: April 25, 2002 Maximum Number of Points: 10Alligator Alley is a Florida tourist attraction that allowed customers to view wildlife as well as picnic on their grounds. They started operations on January 1, 1990, and boughtthe following insurance policies. Building and Personal Property Broad Form Coverage (Appendix C of the text) Policy Type ofInsurer Policy Period LimitsPolicy CNA 1/1/90-12/31/90 Building $10,000 OccurrenceYour Business Personal Property $100,000Personal Property of Others $50,000Other limits as listed in the policy.This policy has no deductible.Hartford 1/1/91-12/31/91 Building $12,000 OccurrenceYour Business Personal Property $120,000Personal Property of Others $50,000Other limits as listed in the policy.This policy has no deductible.St. Paul 1/1/92-12/31/92 Building $15,000 OccurrenceYour Business Personal Property $150,000Personal Property of Others $50,000Other limits as listed in the policy.This policy has no deductible.Commercial General LiabilityRetro Policy Type ofInsurer Policy Period Date LimitsPolicy Economy 1/1/90-12/31/90 1/1/90 $500,000/Occurrence Occurrence$1 Million General Aggregate and $1 Million ProductsAggregateTravelers 1/1/91-12/31/91 1/1/90 $500,000/Occurrence ClaimsMade$1 Million General Aggregate and $1 Million ProductsAggregateAIG 1/1/92-12/31/92 1/1/92 $1 Million/Occurrence ClaimsMade$2 Million General Aggregate and $2 Million ProductsAggregateThe company bought Supplemental Extended Reporting Period tails for the Travelerspolicy and for the AIG policy. Workers’ Compensation and Employer’s LiabilityInsurer: Liberty MutualPolicy Period: 1/1/90-12/31/92Workers’ Compensation based on the laws of: Florida (and any other applicable states)(assume Florida law covers 65% of wage losses)Employer’s Liability Insurance:Bodily Injury by Accident $100,000 each accidentBodily Injury by Disease $500,000 policy limitBodily Injury by Disease $100,000 each employeeFor each of the following incidents, indicate which, if any, of the above policies apply and how much each would pay. For CGL losses, also indicate if the basic policy, the BERP or the SERP would apply. Assume the incidents all have occurred to this company, so, in some cases, the effect of prior claims has to be considered. In some cases, no policy applies; in others, more than one policy may apply. 1. On February 15, 1990, a child playing on a swing set in the picnic area fell off and broke her ankle. Her parents sued on her behalf and won an award of $40,000. The company provided notice about this loss on February 20, 1990. The court made its decision on July 8, 1993.2. On March 20, 1990, one of the company’s employees was driving a company truckafter picking up a new alligator that they had purchased. The alligator thrashed around in the back of the truck and startled the employee, who drove into a tree. The alligator then escaped from the truck. The accident caused $1800 in damage to the truck. The employee was injured and incurred $5000 in medical bills, but did not miss any work. The alligator made its way to a nearby farm and ate a prize cow, worth $600,000. The company is held liable for the loss of the cow. The company provided notice of this loss on March 21, 1990. The court award wasdetermined on January 10, 1991.3. On April 16, 1990, an employee fell into an alligator pit while mowing the grass. The alligators chewed him up pretty badly. He incurred $50,000 in medical bills and missed three months of work. His salary was $2000 per month. The company provided notice about this loss on April 18, 1990.4. On May 13, 1990, a customer was visiting Alligator Alley with her dog. She was having fun letting her dog bark at the alligators to rile them up. While she washolding her dog over the fence, an employee lost his temper, grabbed the dog andflung him into the pit, where he was quickly disposed of by the alligators. The company fired the employee and apologized to the customer, but she still hired a lawyer and sued the company. She was awarded $5,000 for the loss of the dog, $200,000 for emotional distress and $1 million for punitive damages. The company provided notice about this loss on August 8, 1990. The court award was determined on October 19, 1995.5. One of the company’s trucks had a loudspeaker system that was used to generatejungle sounds by playing CDs of animal noises. On September 15, 1990, someonebroke into that truck and stole the company’s entire collection of jungle sound CDs, which had an actual cash value of $2000. It also cost $300 to repair the doorlock that was broken. The company provided notice about this loss on October 18, 1990.6. On January 12, 1991, one of the company’s employees developed a rare tropical illness that was diagnosed as being caused by contact with alligators. The employee had to be airlifted to a hospital in South America that specializes in treating this ailment. Fortunately, the employee made a complete recovery. The medical bills total $200,000 and the employee missed work for six months. Her salary was $2200 a month. The company provided notice about this loss on January 15, 1991.7. On February 14, 1991, an employee driving his own car to work was involved in a serious accident with another car. The employee was injured and the driver of theother car was killed. Although it was hard to determine who was at fault, the jury decided to hold your employee liable and awarded the estate of the other driver $150,000. Your employee only carried $100,000 per accident per person bodily injury liability coverage. Your employee incurred $20,000 in medical bills and missed one month of work. His salary was $1500 per month. The company provided notice about this loss on April 18, 1991.8. On April 29, 1991, a customer slipped and fell on a walkway near the alligator viewing area. The person seemed to be alright at the time, but on January 17, 1992, the company received notice that a suit had been filed for damages, alleging that the fall caused the customer permanent partial paralysis. The company promptly sent the notice to its insurer. On July 19, 1996, the court awarded the customer $150,000 to cover past and future medical expenses,