1 The lessons learned from this case.
There are few lessons that I learned from Valerie Lakey v sta-rite lawsuit case, especially
in term of risk management risk perspective. I will explain the first 3 steps of risk
management:
(a) Establish and determine risk management objectives
(b) Obtain the relevant information for identification of risks
(c) Evaluation of risks that have been identified
First step of risk management is Sta-rite Company should establish the objective of risk
management function so that it is composed with the strategic goals of the organization.
For every company, the objective of risk management is to ensure that the organisation is
able to survive if it suffers a huge financial loss. The same goes to Sta-rite Company, the
objective is to reduce or eliminate the risk that may expose to Sta-rite Company if there is
any lawsuit happened.
For example, Sta-Rite Company has been covered by two insurance policies. The main
policy is a comprehensive general liability policy issued by the National Fire Insurance
Co. (“AIG”) with a limit of $ 2 million. Under this policy, AIG has the duty to defend any
claim within the policy coverage. In addition to this basic AIG, Sta-Rite Company has a
self-insured retention of $ 500,000 and the excess policy issued by Zurich Re (UK) Ltd
(“Zurich”) with a limit of $ 20 million.Therefore, the lesson I learned in the first step is
that Sta-rite Company has identify their own risk management objectives perfectly.
Without a proper risk management objective, the performance of the Sta-rite Company
might not survive until today and the growth of the Sta-rite Company may become
unstable.
Next, the second step is to obtain all relevant information to identify potential loss
exposures. The more details are the information, the lesser the risk will be. However,
Sta-rite Company case , it is considered as a product liability risk which refers to a defect
in a company’s product caused injuries to the plaintiff. Injuries can resulting from product
or design defects, failure to instruct consumers on the safety use of the product. For
example, the cover for the Medfield pool drain did not have a warning stamped on it, but it
have holes for screws. Sta-Rite, Kerner said, is not negligent. The club is the culprit for not
taking greater care to ensure its equipment was in working order. Besides that, Sta-Rite’
chief engineer testified that the company did not put warnings on its pool drain covers until
