Managing Risk Flashcards

A contractor decides not to bid on asbestos abatement jobs because the liability exposure is too high. Which risk management technique is this?

Answer: Risk avoidance

Declining the activity altogether eliminates the exposure, which is risk avoidance.

Requiring subcontractors to carry their own liability insurance and name the contractor as an additional insured is an example of:

Answer: Risk transfer

Shifting potential losses to another party's insurance is risk transfer.

A contractor chooses a higher deductible on its commercial auto policy to lower premiums. This is a form of:

Answer: Risk retention

Agreeing to pay a larger share of each loss out of pocket means retaining part of the risk.

Holding weekly jobsite safety meetings and requiring fall protection mainly serves which risk management goal?

Answer: Risk reduction

Safety training and controls lower the frequency and severity of losses, which is risk reduction.

Which insurance covers a homeowner's claim that the contractor's crew damaged their hardwood floors while working?

Answer: Commercial general liability

CGL covers third-party property damage and bodily injury arising from the contractor's operations.

A contractor's trailer of power tools is stolen from a jobsite. Which coverage most likely pays for the tools?

Answer: Inland marine / contractor's equipment floater

Inland marine (equipment floater) policies cover movable tools and equipment that travel between sites.

What is the first step in the risk management process?

Answer: Identifying risks

Risks must be identified before they can be analyzed, controlled, or financed.