11.4 Review and Practice

1. Assume you live on the Texas Gulf Coast, where hurricane damage can be extensive. Also assume that you own a two-story frame home valued at $120,000. You insured the house for $80,000, which was your purchase price four years ago. If you had a total loss, what reimbursement would you receive from your insurer? What if you had a loss of $10,000? (Assume an 80 percent coinsurance provision.)

2. Erin Lavinsky works for the Pharmacy On-Line company in Austin, Texas. She uses her business computer for personal matters and has received a few infected documents. She was too lazy to update her Norton Utilities and did not realize that she was sending her infected material to her coworkers. Before long, the whole system collapsed and business was interrupted for a day until the backup system was brought up. Respond to the following questions:

   1. Describe the types of risk exposures that Pharmacy On-Line is facing as a result of e-commerce.
   2. If Pharmacy On-Line purchased the ISO endorsement in Chapter 26 "Appendix C", would it be covered for the lost day?
   3. Describe what other risk exposures could interrupt the business of Pharmacy On-Line.
3. What is a standard policy? Why is a standard policy desirable (or undesirable)?

4. Marina Del Ro Shipping Company expanded its operations to the Middle East just before September 11, 2001. Respond to the following questions:

   1. What are the global risk exposures of Marina Del Ro?
   2. What should Marina Del Ro do to mitigate these risks in terms of noninsurance and insurance solutions?
5. Provide an example of a business interruption loss and of an extra expense loss in the e-commerce endorsement.