Match each risk scenario with the correct insurance classification.
- A struggling concert venue owner hires someone to deliberately damage the sound equipment to claim a total loss.Moral Hazard
- A lightning strike causes a sudden power surge that destroys several expensive servers in a data center.Peril
- A delivery driver consistently leaves the delivery van unlocked with the engine running while dropping off packages, assuming the company's auto policy will cover any theft.Morale Hazard
- An apartment building features an aging wooden staircase with significant dry rot that the landlord has not yet replaced.Physical Hazard
Answer
The concert venue owner's actions constitute a Moral Hazard. The lightning strike is a Peril. The delivery driver's actions represent a Morale Hazard. The aging staircase represents a Physical Hazard.
Each scenario illustrates a distinct risk principle: lightning is the active peril causing the loss; dry rot is a physical hazard because it is a tangible property condition; intentional damage is a moral hazard rooted in dishonesty; and leaving a vehicle running is a morale hazard rooted in carelessness.
Step-by-Step Solution
Key Concept
Distinguishing between perils (causes of loss) and the three types of hazards (physical, moral, and morale) that increase the frequency or severity of a loss.