Question

In: Finance

Case Problem 2 – Lawsuit Defense Strategy John Campbell, an employee of Manhattan Construction Company, claims...

Case Problem 2 – Lawsuit Defense Strategy

John Campbell, an employee of Manhattan Construction Company, claims to have injured his back as a result of a fall while repairing the roof at one of the Eastview apartment buildings. He filed a lawsuit against Doug Reynolds, the owner of Eastview Apartments, asking for damages of $1,500,000. John claims that the roof had rotten sections and that his fall could have been prevented if Mr. Reynolds had told Manhattan Construction about the problem. Mr. Reynolds notified his insurance company, Allied Insurance, of the lawsuit. Allied must defend Mr. Reynolds and decide what action to take regarding the lawsuit. Some depositions and a series of discussions took place between both sides. As a result, John Campbell offered to accept a settlement of $750,000. Thus, one option is for Allied to pay John $750,000 to settle the claim. Allied is also considering making John a counter- offer of $400,000 in the hope that he will accept a lesser amount to avoid the time and cost of going to trial. Allied’s preliminary investigation shows that John’s case is strong; Allied is concerned that John may reject its counteroffer and request a jury trial. Allied’s lawyers spent some time exploring John’s likely reaction if they make a counteroffer of $400,000. The lawyers concluded that it is adequate to consider three possible outcomes to represent John’s possible reaction to a counteroffer of $400,000: (1) John will accept the counteroffer and the case will be closed; (2) John will reject the counteroffer and elect to have a jury decide the settlement amount; or (3) John will make a counteroffer to Allied of $600,000. If John does make a counteroffer, Allied decided that it will not make additional counteroffers. It will either accept John’s counteroffer of $600,000 or go to trial. If the case goes to a jury trial, Allied considers three outcomes possible: (1) the jury may reject John’s claim and Allied will not be required to pay any damages; (2) the jury will find in favor of John and award him $750,000 in damages; or (3) the jury will conclude that John has a strong case and award him the full amount of $1,500,000. Key considerations as Allied develops its strategy for disposing of the case are the probabilities associated with John’s response to an Allied counteroffer of $400,000 and the probabilities associated with the three possible trial outcomes. Allied’s lawyers believe that the probability that John will accept a counteroffer of $400,000 is 0.10, the probability that John will reject a counteroffer of $400,000 is 0.40, and the probability that John will, himself, make a counteroffer to Allied of $600,000 is 0.50. If the case goes to court, they believe that the probability that the jury will award John damages of $1,500,000 is 0.30, the probability that the jury will award John damages of $750,000 is 0.50, and the probability that the jury will award John nothing is 0.20.
Managerial Report

Perform an analysis of the problem facing Allied Insurance and prepare a report that summarizes your findings and recommendations. Be sure to include the following items: • A decision tree
• A recommendation regarding whether Allied should accept John’s initial offer to settle the claim for $750,000 • A decision strategy that Allied should follow if they decide to make John a counteroffer of $400,000 • A risk profile for your recommended strategy

Solutions

Expert Solution


Related Solutions

John Campbell, an employee of Manhattan Construction Company claims to have injured his back as a...
John Campbell, an employee of Manhattan Construction Company claims to have injured his back as a result of a fall while repairing the roof at one of the Eastview apartment buildings. He filed a lawsuit against Doug Reynolds, the owner of Eastview Apartments, asking for damage of $1,500,000. John claims that the roof had rotten sections and that his fall could have been prevented if Mr. Reynolds had told Manhattan Construction about the problem. Mr. Reynolds notified his insurance company,...
Garbage collector works in following condition: 1. Employee john = new Employee() john=null; 2. Employee c1...
Garbage collector works in following condition: 1. Employee john = new Employee() john=null; 2. Employee c1 =new Employee() Employee c2 = new Employee() c1=c2; 3. new Employee(); //anonymous object Please create a class /classes in java which contains examples related to above 3 conditons.
According to Case 19- Deere & Company in 2014: Its International Strategy in the Agricultural, Construction,...
According to Case 19- Deere & Company in 2014: Its International Strategy in the Agricultural, Construction, and Forestry Equipment Industry, how have the Deere and Company’s business strategy choices strengthened or weakened its competitive position in the agricultural and construction equipment industry? Is Deere and Company’s international strategy best characterized as a multi-country, global or hybrid? Please explain.
. During 2018, a former employee of Staple Company filed a lawsuit alleging age discrimination and...
. During 2018, a former employee of Staple Company filed a lawsuit alleging age discrimination and asking for damages of $500,000. At December 31, 2018,Staple's legal counsel indicated that the likelihood of losing the lawsuit was possible but not probable and a good estimate for any potential loss is approximately $250,000 based on previous experience with similar cases. How should this suit be handled on the 2018 financial statements?
Case Problem 2 Chapter 7 Introduction to Linear Programming Production Strategy Production Strategy Better Fitness, Inc....
Case Problem 2 Chapter 7 Introduction to Linear Programming Production Strategy Production Strategy Better Fitness, Inc. (BFI) manufactures exercise equipment at its plant in Freeport, Long Island. It recently designed two universal weight machines for the home exercise market. Both machines use BFI-patented technology that provides the user with an extremely wide range of motion capability for each type of exercise performed. Until now, such capabilities have been available only on expensive weight machines used primarily by physical therapists. At...
Problem 20-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed...
Problem 20-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017, the general ledger for Case Inc. contains the following data. Raw Materials Inventory $4,998 Manufacturing Overhead Applied $38,842 Work in Process Inventory $6,593 Manufacturing Overhead Incurred $37,664 Subsidiary data for Work in Process Inventory on June 1 are as follows. Job Cost Sheets Customer Job Cost Element Rodgers Stevens Linton...
Problem 20-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed...
Problem 20-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017, the general ledger for Case Inc. contains the following data. Raw Materials Inventory $4,368 Manufacturing Overhead Applied $33,946 Work in Process Inventory $5,762 Manufacturing Overhead Incurred $32,916 Subsidiary data for Work in Process Inventory on June 1 are as follows. Job Cost Sheets Customer Job Cost Element Rodgers Stevens Linton...
Problem 16-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed...
Problem 16-3A Case Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2017, the general ledger for Case Inc. contains the following data. Raw Materials Inventory $ 4,662 Manufacturing Overhead Applied $ 36,230 Work in Process Inventory $ 6,149 Manufacturing Overhead Incurred $ 35,132 Subsidiary data for Work in Process Inventory on June 1 are as follows. Job Cost Sheets Customer Job Cost...
2. John has a special coin and he claims that it lands head 67% of the...
2. John has a special coin and he claims that it lands head 67% of the time it is tossed. a. What is the probability that in 22 tosses, the coin would land heads 13 or fewer times? b. If John actually tossed the coin 22 times and obtained 13 heads, would you have a good reason to doubt that John’s claim (head lands head 67% of the time) is true? Explain your answer.
Outline the case for a partnership strategy for a software company
Outline the case for a partnership strategy for a software company
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT