summer%202008%20homework%201%20sample%20one - 7/18/2008...

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Unformatted text preview: 7/18/2008 Homework Assignment #1 On February 20, 2003, the nightclub The Station in West Warwick, Rhode Island, was engulfed in flames. This fire led to 100 deaths and more than 200 injuries. In the following discussion, I will describe several different issues, hazards, risks, legal circumstances that existed before the historic nightclub fire. Also, I will provide insights into different risk management ideas that could have mitigated the losses from the fire, and other legal/regulatory consequences resulting from the fire. The risk of fire in a nightclub is a pure risk that insurers find insurable. In fact, the government requires liability insurance for nightclubs in the event that the nightclub owners have to pay damages to their property or bodily injuries resulting from accidents. Also, insurers provide coverage to mitigate indirect losses resulting from fire, including worker’s compensation and loss of income by the nightclub. After the fire that occurred at The Station, its insurance company would have had to pay out settlements for the losses described above. Settlements would have been paid to the families who lost loved ones as a result of the fire, as long as losses were deemed fortuitous and the cause of the fire did not breech the insurance policies. Other institutions also paid settlements to the aforementioned families. The fire at The Station in Rhode lsland resulted from pyrotechnics during the opening song of the headlining band, Great White. The pyrotechnics ignited flammable soundproofing foam installed on the walls of the nightclub. This flammable soundproofing foam is considered a hazard in the insurance world, since it increased the severity of loss resulting from the fire. Once the soundproofing foam ignited, the fire spread quickly and the patrons of The Station ran for the exits. Naturally, most all the patrons headed for the doorway in which they entered the nightclub. This created a bottleneck at that exit and caused several injuries from people being trampled on, and prevented others from escaping. Later research concluded that the exit was too small for the capacity of the nightclub and can be considered another hazard Although other exits from the nightclub were available, the patrons of the nightclub were either not aware of those exits or the exit was blocked off (morale hazard by the nightclub owners). The NlST, a government organization leading the investigation of the fire, called for more research into human behavior during massive panic in a fire. This information would be valuable to insurers when undenrvriting policies for clients. During the investigation of the fire it was found that The Station was in violation of an important requirement by the State of Rhode Island regarding building codes. When the owners of the nightclub decided to covert the existing structure into a nightclub a “change of occupancy” occurred. This "change of occupancy” required that the structure be fitted with a sprinkler system. The fire inspectors of the nightclub missed this requirement of the structure. The NlST determined, through computer simulations, that if a sprinkler system was installed, then the loss of life and property would not have been so great. Consequently, strict building codes were established in Rhode Island. The lessons learned from this tragic fire have provided several insights into better risk management techniques recommended by the NIST. These ideas include sprinkler systems requirements, better enforcement and inspection of fire codes, lager entryways for more rapid evacuation, more fire extinguishers, restrictions on flammable materials used in construction of nightclubs, and eliminating the exemption of older nightclubs from new fire and safety requirements, These new insights should prevent and reduce future losses in the event of a fire, resulting in lesser premiums for all insured. ...
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This note was uploaded on 07/31/2008 for the course RM 357E taught by Professor Arnold during the Summer '08 term at University of Texas at Austin.

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summer%202008%20homework%201%20sample%20one - 7/18/2008...

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