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Difficulty: MediumPerils and Hazards

An office building features an aging roof with several missing shingles that the property owner has neglected to repair. During a severe rainstorm, water enters through the compromised sections of the roof, completely ruining the expensive computer servers inside. Based on fundamental risk management principles, which of the following correctly identifies the peril and the hazard in this situation?

  1. A
    The missing roof shingles are the peril, and the rainstorm represents a physical hazard.
  2. B
    The rainstorm is the peril, and the missing roof shingles represent a moral hazard.
  3. The rainstorm is the peril, and the missing roof shingles represent a physical hazard.Answer
  4. D
    The damaged computer servers are the peril, and the rainstorm represents a morale hazard.

Answer

The rainstorm is the peril, and the missing roof shingles represent a physical hazard.
In insurance terminology, a peril is the direct, active cause of a loss. In this scenario, the rainstorm actively caused the water intrusion that destroyed the computer servers. A hazard is a condition that increases the likelihood or severity of a loss from a peril. Because the missing roof shingles are a tangible, material defect in the property, they are classified specifically as a physical hazard.

Step-by-Step Solution

1
Identify the direct, active cause of the loss in the scenario to determine the peril.
The rainstorm actively forced water into the building, making it the peril.
By definition, a peril is the active event or force that causes damage or loss.
2
Identify the condition that increased the likelihood of the loss and classify its type.
The missing roof shingles increased the chance of water entering the building. Because this is a tangible, material defect, it is classified as a physical hazard.
Hazards are conditions that elevate risk. Differentiating between physical (structural/material), moral (dishonesty), and morale (carelessness) hazards is required for correct classification.
3
Select the option that correctly pairs the identified peril and hazard.
The correct pairing states the rainstorm is the peril and the missing shingles are a physical hazard.
This directly aligns the scenario's facts with standard risk management terminology.

Key Concept

Distinguishing Perils and Hazards
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Topics

Perils and Hazards

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