Dch Insurance
George Jetson, an employee of Spacely Construction Company, claims to have injured his back as a result of a fall while repairing the roof at of the 1313 Mockingbird Lane Apartments. He filed a lawsuit against Herman Munster, the owner of 1313 Mockingbird Lane Apartments, asking for damages of $1,500,000. George claims that the roof had rotten sections and that his fall could have been prevented if Mr. Munster had told Spacely Construction about the problem. Mr. Munster notified his insurance company, Dewey, Cheatem and Howe Insurance (DCH), of the lawsuit. DCH must defend Mr. Munster and decide what action to take regarding the lawsuit.
George Jetson offered to accept a settlement of $750,000 which is one option. DCH is also considering a counteroffer of $400,000 hoping that he will accept this amount to avoid the time and expenses of a trial. There are three possible outcomes to represent George’s possible reaction to the counteroffer of $400,000: 1) George will accept the counteroffer and the case will be closed; 2) George will reject the counteroffer and elect to have a jury decide the settlement amount; or 3) George will make a counteroffer to DCH of $600,000. If George does make a counteroffer, DCH decided that they will not make additional counteroffers. They will either accept George’s counteroffer of $600,000 or go to trial.
If the case goes to trial, DCH considers three possible outcomes: 1) the jury may reject George’s claim and DCH will not be required to pay any damages; 2) the jury will find in favor of George and award his $750,000 in damages; or 3) the jury will conclude that George has a strong case and award him the full amount of $1,500,000. DCH’s lawyers believe the probability that George will accept the counteroffer of $400,000 is 0.10, the probability that George will reject the counteroffer of $400,000 is 0.40, and the probability that George will, himself, make a counteroffer to DCH of $600,000 is 0.50. If the case goes to court, they
George Jetson offered to accept a settlement of $750,000 which is one option. DCH is also considering a counteroffer of $400,000 hoping that he will accept this amount to avoid the time and expenses of a trial. There are three possible outcomes to represent George’s possible reaction to the counteroffer of $400,000: 1) George will accept the counteroffer and the case will be closed; 2) George will reject the counteroffer and elect to have a jury decide the settlement amount; or 3) George will make a counteroffer to DCH of $600,000. If George does make a counteroffer, DCH decided that they will not make additional counteroffers. They will either accept George’s counteroffer of $600,000 or go to trial.
If the case goes to trial, DCH considers three possible outcomes: 1) the jury may reject George’s claim and DCH will not be required to pay any damages; 2) the jury will find in favor of George and award his $750,000 in damages; or 3) the jury will conclude that George has a strong case and award him the full amount of $1,500,000. DCH’s lawyers believe the probability that George will accept the counteroffer of $400,000 is 0.10, the probability that George will reject the counteroffer of $400,000 is 0.40, and the probability that George will, himself, make a counteroffer to DCH of $600,000 is 0.50. If the case goes to court, they
References: Jacobs, R., & Chase, R. (2011). Operations and Supply Chain Management (13th ed.). New York, NY: McGraw-Hill/Irwin.