MHIC Managing Risk 2

Question 1

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

Accepted Answer

Risk avoidance

Answer

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

Question 2

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

Accepted Answer

Risk transfer

Answer

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

Question 3

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

Accepted Answer

Risk retention

Answer

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

Question 4

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

Accepted Answer

Risk reduction

Answer

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

Question 5

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

Accepted Answer

Commercial general liability

Answer

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

(MHIC) Maryland Home Improvement Contractor Practice Test