Evaluation and Analysis of Risk Exposures Flashcards
Risk Management
Risk management is defined as the logical development and execution of a plan to deal with potential losses.
Two Levels of Risk Management
In Risk Management, there are two levels to consider:
Risk Control (avoidance/ reduction)-and
Risk Financing-(retention and transfer).
Personal Risk
Personal risks are those that directly impact one’s person (death, disability, health).
Property Risk
Property risks impact one’s possessions and liability to others. Identifying and measuring these loss exposures can be challenging.
Risk Administration
For example, you should monitor the cost associated with your risk management program, also known as risk administration. Risk administration includes costs such as the premiums you pay, as well as the time you spend analyzing your risk situation. As time goes by, the cost associated with your risk management program may prompt you to reevaluate your implementation strategy.
Sources of Liability Losses
The cost of a legal defense. A defense can be expensive even in cases where a court finds that claims made by the victim are groundless, false, and/or fraudulent. In some cases, the legal defense costs more than the damages awarded to parties claiming injury.
Legal damages awarded by a court to an injured party.
The cost of loss prevention arising from potential legal liability.
OSHA
Loss control engineering became increasingly important in the United States with the passage of the Occupational Safety and Health Act of 1970 (OSHA). This federal law is designed to promote a safe working environment for employees.
Duties for Employers under OSHA
Removal of all recognized hazards from the work environment
Compliance with the standards for a safe working environment.
OSHA Non Compliance
Imposes heavy fines for noncompliance.
Provides a provision for imprisonment in some cases where employees’ injuries are fatal.
Provides for on-site reviews by OSHA inspectors.
Requires extensive record keeping by employers
Requires that employers enforce safety regulations rather than merely post signs or provide safety equipment.
Legal Liability Insurance
Legal liability insurance provides protection against the financial impact of lawsuits. Liability losses occur as easily as property losses.
Breach of Contract
Breach of contract involves a failure, without a legal excuse, to perform contractual duties.
Reasonable Person
A review of many court cases in which the concept of the reasonable person has been applied leads to the definition of a reasonable person as one who has normal possession of all faculties and senses; who thinks, speaks, and acts based on reason; and who is honest and moderate in all activities.
Vicarious Liability
Courts can also impose liability for the negligent acts of other parties.
Joint & Several Liability
The rule of joint and several liability means that if a party is one of several responsible for a loss, even if that parties’ contribution was the slightest of all, then that party is fully responsible for making restitution to the injured party if the other defendants are financially unable to do so.
Compensatory Damages
Courts award compensatory damages to put the victim in the same financial condition after an injury as he or she was in before the occurrence.
Punitive Damages
Punitive damages are awards made to plaintiffs not as compensation for injuries suffered, but as a means of punishing defendants for outrageously offensive acts. What constitutes such an act is a question of fact. The insurer usually agrees to pay for injuries inflicted by negligence on behalf of the insured individual. Punitive damages usually imply gross negligence, something for which the insurer may not have contemplated making payment.
Contributory Negligence
Assuming the plaintiff establishes the defendant’s negligence, the defendant may counter with a defense of contributory negligence. If it can be shown the plaintiff’s own negligence contributed to or led to the injury sustained, the court will not allow recovery of damages from the defendant under the contributory negligence rule.
Doctrine of Comparative Negligence
The comparative negligence doctrine allows plaintiffs some recovery despite contributing to their own injuries.
Three categories of tort liability
Intentional torts: Defendant’s actions are calculated to cause injury to another.
Negligent torts: Defendant unintentionally acts or fails to act in a prudent manner.
Strict liability torts: Damages result from dangerous activities.
Intentional Torts
Through intentional torts, the tortfeasor acts deliberately with the desire to harm the plaintiff.
