Topic Chapter 3 Class Notes Topic 3 What Are The Loss Expenditures Traditional Risk Management and Enterprise Risk Management Exposures Property Loss Exposures o EXAMPLE presents possibility that a person organization will sustain a loss from damage When property is stolen owner suffers total loss of that property because the owner no longer has use of it In addition property damage can result in loss of income because property can t be used to generate income or extra expenses are incurred to continue operations o Legal Interest In property Financial Stake o Common Source of Interest in Property Present ownership Future Interest Inherit Car Home Bank Mortgage Creditors Bailee Bailor Entity who receives property from another Owner of Property Contract of Bailment o Delivery of property for specific purpose o Has to be returned to Bailor EXAMPLES o Dry Cleaning o Textbook Rental o Rent Receive ticket receipt claiming they re not responsible for loss or damage They Have the 3 C s CCC Care Custody and Control Park Car in garage sign says not responsible Limit Exposure Limited to repair or replacement value not consequential damages Net Income Loss Exposure Business Interruption Loss Possibility of loss because of a reduction in Net Income o Net Income Revenue Expenses o EXAMPLE Fire suffer property loss primary loss As a result of the fire additional expenses Net Income decreases Revenue decreases and Expenses Increase o Net Income losses ALWAYS a result of another loss occurring first o Events cause Net Income Loss EXAMPLES Building with garage has fleet of cars and trucks Real Building personal fleet Insurance Building and fleet No service No Income Revenue Rent increases Expenses o Fleet o Garage Run Business Customers go over to competitor o Must offer discounts and coupons to gain them back Need a new vendor Difficult to quantify insurance company needs proof Lose Place in market Reputation Liability Loss Exposure o Lawsuits NOT covered by insurance Contract Breach Moral Hazard Breach of Contract Results from claim itself not necessarily the payment of damages No penalty for Breach then why not breach Failure without legal excuse to fulfill contractual promise Bad Behavior Moral Hazard Intentional Willful Criminal Defamation o Slander Spoken o Libel Printed Written o 100 defense TRUTH Negligence has to be present Negligence has to cause damage Damage Loss Establish Legal Liabilities imposed by civil law can be based on torts contracts statutes Obligated to pay for damages What constitutes Negligence Civil not criminal Involves money Absolute Strict Liability Failure of a person firm entity to exercise proper degree of care Burden of proof is on the plaintiff brings the lawsuit against defendant negligent nor intent to harm imposed liability regardless of defendant neither acting Merely because event happens regardless of fault EXAMPLES o Rear ended in car fault assumes to car that hit you o DUI car accident assumed you were at fault o Exotic animals Measurement measuring the sum to pay Issue in Legal Liability Property damage bodily injury These are Measureable Pain and Suffering Mental Anguish Not Measureable Punitive Damages individual for losses intended to punish wrong doer Awarded by a jury to punish more than necessary to compensate Insurance will not cover Modifications of Law of Negligence Res ipsa loquitur the thing speaks for itself negligence inferred by accident occurring EXAMPLES o Surgery Sponge left inside patient patient did nothing to contribute to Vicarious Liability One person becomes legal liability for negligent acts of another damages defendant had no control o DUI passenger injured Employer Employee Doctor Nurse Bartender Visibly intoxicated customer Employer Employee o Employee must be acting at employer direction o Is capacity of employment o Course Scope of employers business o EXAMPLES Employee doing something illegal Employee disregards safety rules Work Place Violence Intentional acts should have known or to know Employer in a position Behavior is different bad Background checks criminal Quality of work gets worse decreases Drug test Workers Comp Caps on Damages Sovereign Immunity Charitable Immunity NJ Boys Choir Cant sue the president Catholic church Limit on jury award Employee cant sue employer for work related injury Joint and Several Liability 2 or more parties that can pay will pay Effects deep pocket go after person with most money Products Recall Johnson Johnson Tylenol case Deaths Media coverage Reputation No right or consent of owner Cannot do them intentional harm Trespasser Licensee Knowledge of owner Must warn of hidden danger They take premises as they find it Social Guest Invitee Must keep safe no harm can come Attractive Nuisance Pool children attracted to it drown Railroad tracks construction sites frozen bodies of water Assumption of Risk Waiver Particularly Children Party assumes liability because they are voluntarily choosing to do a dangerous activity o EXAMPLE Skydiving
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