Chapter 4, Problem 8QAP

Thompson’s house was destroyed by fire and claims were filed with the insurance company.  The insurance company (insurer) hired Cannon to investigate the fire as it was suspicious about the cause.  Subsequently, the insurer denied the claims based on Cannon’s report.  Thompson sued the insurer and Cannon.  Thompson claimed to be a third party beneficiary of the Cannon-insurer contract.     Is Thompson correct?  If not, what type of beneficiary is he and why? ​

Murray reported to the Environmental Protection Agency that his employer was illegally dumping chemicals into a river. His charges were true, and Murray's employer was fined. In retaliation, Murray's employer fired him and made deliberate efforts to prevent Murray from obtaining other employment. Murray sued the employer, claiming that his reputation had been damaged. Murray won his lawsuit and received an award for "damages to his personal and professional reputa- tion and for his mental suffering." Now he would like to know whether the award is taxable. He argues that he was awarded damages as a recovery of his human capital and that a recovery of capital is not income. Is Murray's logic comrect?

You have sued your employer for damages suffered when you recently slipped and fell on an icy surface that should have been treated by your company’s physical plant department. Your injury was sufficiently serious that you, in consultation with your attorney, decided to sue your company for $500,000. Your company’s insurance provider has offered to settle this suit with you out of court. If you decide to reject the settlement and go to court, your attorney is confident that you will win the case but is uncertain about the amount the court will award you in damages. He has provided his assessment of the probability distribution of the court’s award to you in the file P09_37.xlsx. In addition, there are extra legal fees of $10,000 you will have to pay if you go to court. Let S be the insurance provider’s proposed out-of-court settlement (in dollars). For which values of S will you decide to accept the settlement? For which values of S will you choose to take your chances in court? Assume…