You are free to use the textbook, powerpoints, and any class notes you have developed in formulating your response. Do not utilize any external sources beyond these materials. The question will emphasize material developed in Chapter 3 and Chapter 26 of the text. The paper should be 3-4 pages in length to answer the questions completely, but the paper cannot exceed 5 pages, double spaced, 12-point font.
For the purposes of this question you are to assume the role of the Director of Risk Management for Boeing, Inc. Recently Boeing has experience significant problems with an aircraft it designed and manufactures – the 737-MAX-8. For details regarding the issues you are permitted to utilize the following links:
https://www.cnn.com/2019/03/10/africa/ethiopian-ai”¦
https://www.cnbc.com/2019/04/04/ethiopia-report-ca”¦
https://www.businessinsider.com/boeing-ceo-apologi”¦
Part 1
Identify four critical loss exposures associated with the design, development, distribution and sale of a new aircraft for a company like Boeing. Which of these exposures is the most significant in terms of loss severity and why? Finally, describe in detail two different risk control strategies you could apply to manage any one of these loss exposures you identify among the four critical loss exposures.
Part 2
In responding to the issues presented by the 737-MAX-8 crashes, assume the company purchases the following forms of insurance:
D&O Coverage – $200,000,000 in aggregate limit
Commercial General Liability (“CGL”) – $500,000,000 in aggregate limit
Commercial Umbrella – $500,000,000 in aggregate limit
Describe how each of the three coverages might be called upon to respond to liability claims that may arise related to the crashes from either the airlines that purchased 737s, the families of the passengers that passed away as a result of the crashes, or the shareholders of Boeing, Inc. Finally, highlight one exclusion typically found within a CGL policy that could be an issue in relation to the scope of coverage for the 737-MAX-8 problems.