A logistics company operates a busy distribution center. The warehouse manager notices that a large section of the concrete floor is heavily coated in leaked motor oil from forklifts, making it extremely slick. Despite receiving several employee complaints about the dangerous condition, the manager ignores the issue to avoid spending budget on professional cleaning. A week later, a warehouse worker slips on the oil, falls hard onto the concrete, and suffers a severe spinal injury. Based on fundamental risk management principles, which of the following accurately classifies the elements of this loss?
- The oil-covered floor is a physical hazard, the manager's indifference to the known danger is a morale hazard, and the slip and fall is the peril.Answer
- BThe oil-covered floor is the active peril, the manager's decision to ignore the spill represents a moral hazard, and the resulting slip and fall is a physical hazard.
- CThe manager's conscious decision to ignore the spill is the peril, while both the oil-covered floor and the employee's slip and fall are considered physical hazards.
- DThe oil-covered floor and the manager's indifference are both classified as moral hazards, while the employee's spinal injury represents the peril.
Answer
The oil-covered floor is a physical hazard, the manager's indifference to the known danger is a morale hazard, and the slip and fall is the peril.
In insurance terminology, a peril is the specific cause of a loss (the slip and fall). A hazard is a condition that increases the frequency or severity of a loss. The oil on the floor is a tangible condition, making it a physical hazard. The manager's conscious indifference to fixing a known safety issue is an attitude that increases risk, which strictly defines a morale hazard.
Step-by-Step Solution
Key Concept
Distinguishing between Perils, Physical Hazards, Morale Hazards, and Moral Hazards