Reference no: EM13388377

Mike Jones had worked at Travel-Rite as a bus driver for five years. He enjoyed the job. In turn, Travel-Rite was pleased with Mike, because he was courteous with clients and had a flawless safety record.

Mike was driving twenty-five tourists from Washington, DC to New York City on Interstate 95. He noticed that his fuel gauge showed that his twenty-nine passenger mini-bus was getting low on fuel, so he pulled into a gas station along the highway. At the fuel pump, he told the station attendant to fill up the fuel tank. Ten minutes later, the tank was filled and Mike pulled out of the gas station. The bus traveled about twenty-five meters, and then the engine died. Mike tried futilely to restart the engine.

It turned out that the gas station attendant had accidentally filled the fuel tank with gasoline instead of diesel fuel. The only way to deal with this would be to drain the gasoline out of the fuel tank and to remove all traces of gasoline in the engine. The gas station lacked this capability, so the gas station manager arranged to have the mini-bus towed to a nearby garage. Meanwhile, Mike telephoned Travel-Rite’s headquarters to tell them of his predicament. The headquarters staff arranged to have the tourists picked up by a bus service operating out of New York City. Two hours after the bus breakdown, the tourists resumed their journey.

The mini-bus was towed to the garage, where mechanics attempted to determine whether the engine had been damaged by the gasoline. The chief mechanic telephoned Travel-Rite headquarters to deliver his report and was put in touch with Jennifer Chen, Travel-Rite’s president.

“There’s no problem cleaning up the engine,” he reported. “In fact, we’ve already got it working. However, you appear to have a problem with your transmission, because the bus won’t go into second gear. We looked at the transmission and saw that it’s damaged.”

Jennifer was shocked to hear this and immediately telephoned the automobile dealer from whom she bought her buses. When he heard the story, he understood the nature of the problem.

“The transmission was damaged when the bus was being towed,” he said. “The drive trains of buses are a bit complicated. You can’t just hook them up to a tow truck and start towing them. Several steps have to be taken to prepare them for towing, and obviously the tow truck driver didn’t do this.”

Jennifer felt sick. What began as an innocent refueling had turned into a disaster. Clients had been inconvenienced. Her new bus had been damaged. All this was happening far from headquarters, so resolution of the dispute with the gas station, tow truck company, and garage would have to be carried out remotely.

Questions

1. From Travel-Rite’s perspective, to what extent is the incident described in this case an “act of God” as opposed to a controllable event?

2. What general categories of risk are being encountered here (e.g., business risk)? Explain your answer.

3. How would you go about conducting an ex post facto risk assessment of this incident? What conclusions might result from this assessment? What risk mitigation steps should be taken to avoid a repetition of this kind of event in the future?