A claims examiner reviews three situations: an expired fire extinguisher at a clinic (1), a patient who exaggerates symptoms to obtain prescription drugs (2), and a nurse who becomes careless after the clinic purchases liability coverage (3). In order, these are best classified as:

Why A is correct

The expired extinguisher is a physical hazard — a tangible condition increasing the chance of loss. The patient's exaggeration is a moral hazard — intentional dishonesty to profit from insurance. The nurse's carelessness arising after coverage was purchased is a morale hazard — indifference fostered by the existence of insurance. Correctly classifying hazards is essential because each is managed differently in underwriting and claims.

Why the other options are wrong

• B) This scrambles the categories: the patient is the dishonest actor (moral), the nurse is the careless one (morale), and the extinguisher is the tangible condition (physical).
• C) None of these is the cause of a loss (peril); all three are conditions that make losses more likely (hazards).
• D) The situations describe hazard types, not risk categories; pure and speculative risks are classifications of risk, not of conditions.

Memory hook

Extinguisher = physical (touch it), exaggerator = moral (fraud), careless nurse = morale (slacker).