A homeowner stores several unsealed containers of gasoline immediately adjacent to a gas-powered water heater in an enclosed garage. Later that week, a spark from the water heater ignites the accumulated fumes, causing a severe fire that destroys the entire structure. Based on foundational risk management principles, which of the following correctly identifies the peril and the hazard in this situation?
- The fire is the peril, and the presence of unsealed gasoline near an ignition source is a physical hazard.Answer
- BThe unsealed gasoline is the peril, and the resulting fire is a physical hazard.
- CThe fire is the peril, and the presence of the unsealed gasoline is a moral hazard.
- DThe destruction of the garage is the peril, and the spark from the water heater is a morale hazard.
Answer
The fire is the peril, and the presence of unsealed gasoline near an ignition source is a physical hazard.
In insurance terminology, a peril is the active, direct cause of a loss, which in this scenario is the fire. A hazard is a condition that increases the frequency or severity of a loss. The physical presence of unsealed gasoline next to a heat source is a tangible, material condition that dramatically increased the chance of a fire, making it a physical hazard.
Step-by-Step Solution
Key Concept
Distinguishing between Perils (causes of loss) and Hazards (conditions increasing risk), and identifying Physical Hazards.