Lori, age 26, works as a waitress at an upscale restaurant in Dallas, Texas. After the restaurant closed one evening, she drove home in a blinding rainstorm. A drunk driver ran a red light, smashed head-on into Lori’s car, and was instantly killed. Lori was more fortunate. She lived but was unable to work for six months. During that time, she incurred medical bills in excess of $100,000 and lost about $20,000 in tips and wages. The restaurant did not provide any health or disability income insurance, whereas the driver had a life and health insurance plan.

a) Identify the major pure risks or pure loss exposures to which the drunk driver and Lori are exposed respectively with respect to each of the following. Explain your answer.

i) Personal loss exposures

ii) Property loss exposures

iii) Liability loss exposures

b) What are the types of hazard confronting Lori and the drunk driver? Explain your answer.

c) Briefly discuss how Lori could have handled the risks.

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