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Difficulty: MediumPerils and Hazards

A commercial property inspector is assessing a retail warehouse to determine its insurability. The inspector notes several risk elements that need to be properly categorized. According to insurance principles, which of the following findings would be correctly classified as physical hazards? (Select all that apply)

  1. Frayed electrical wiring discovered near highly combustible cardboard inventoryAnswer
  2. A broken deadbolt lock on the facility's rear loading dock doorAnswer
  3. C
    The facility manager's careless attitude toward enforcing routine safety inspections
  4. D
    An electrical fire that previously damaged a portion of the storage area

Answer

The frayed electrical wiring and the broken deadbolt lock are correctly classified as physical hazards.
Frayed electrical wiring and a broken deadbolt lock are both tangible, structural conditions of the property that increase the likelihood of a loss (fire and theft, respectively). Therefore, they perfectly meet the definition of physical hazards.

Step-by-Step Solution

1
Identify the definition of a physical hazard in insurance.
A physical hazard is a tangible, material, or structural condition of a property that increases the probability or severity of a loss.
Establishing the correct definition is necessary to evaluate each scenario presented in the options.
2
Distinguish hazards from perils.
A peril is the direct cause of loss (e.g., fire, wind, theft), while a hazard is a condition that makes the peril more likely to happen.
This distinction eliminates options that describe actual causes of loss.
3
Differentiate between types of hazards (physical, moral, morale).
Physical hazards are tangible conditions. Moral hazards involve intentional dishonesty. Morale hazards involve carelessness or indifference.
This allows for the exclusion of hazards that stem from human behavior rather than physical property conditions.
4
Evaluate each option based on the established definitions.
The frayed wiring and broken lock are tangible conditions (physical hazards). The careless attitude is a morale hazard. The fire is a peril.
Applying the concepts to the given scenarios identifies the correct answers.

Key Concept

Physical hazards are tangible, structural, or material conditions that increase the likelihood or severity of a loss, distinct from perils (the causes of loss) and morale/moral hazards (which relate to human behavior).
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Topics

Perils and Hazards

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