A commercial building owner discovers a slow leak in the facility's roof but intentionally delays repairs for several months, reasoning that their property insurance policy will cover any resulting damage. During a severe storm, the weakened roof collapses under the weight of heavy rainfall, destroying the inventory inside.
Based on insurance principles, which of the following correctly classifies the elements in this scenario?
- The roof collapse is the peril, and the owner's attitude toward the repairs is a morale hazard.Answer
- BThe roof collapse is the peril, and the owner's attitude toward the repairs is a moral hazard.
- CThe owner's failure to repair the roof is the peril, and the severe storm is a physical hazard.
- DThe severe storm is the peril, and the owner's attitude toward the repairs is a physical hazard.
Answer
The correct classification identifies the roof collapse as the peril and the owner's attitude toward the repairs as a morale hazard.
The correct answer accurately distinguishes between the cause of the loss and the condition that exacerbated it. A peril is the active, direct cause of a loss, which in this case is the roof collapse resulting from the storm. A morale hazard refers to an attitude of carelessness or indifference to loss because of the existence of insurance. The owner's reasoning that the insurance would cover the damage perfectly illustrates a morale hazard.
Step-by-Step Solution
Key Concept
Perils and Hazards
Estimated Time:1m 0s