Risk Management Loss Scenario
Read and discuss the loss scenario “Wheeler’s Tire Fire” Risk
Management Exercise 
“Wheeler’s Tire Fire Incident”
About 1: 30 A.M. on April 17, 1995, a fire erupted at Wheeler’s Tire Disposal,
Inc. This corporation, wholly owned by Walt Wheeler, operates a large tire disposal yard
in the Ribiera Riverside section of Friendship City, a metropolitan area in the eastern
United States. Walt's company also has a similar, but somewhat smaller, tire disposal
yard in each of two other cities: one is fifty miles north of Friendship City; the other is
eighty miles south of the city. Wheeler's uses a combination of chemical, grinding, and
crushing processes to recycle scrap tires into a variety of rubber-based raw which
Wheeler's sells at wholesale as its major source of revenue.
Because of their rubber, petroleum, and complex chemical content, burning tires
give off great heat. They also produce much billowing, highly acrid smoke, especially
when mounded into towering piles. Such piles had crowded Wheeler's lot for several
months before the fire, prompting many neighboring property owners to complain that
Wheeler's operations an illegal environmental hazard. Most of the tires burned during the
six that the fire was out of control or during the several days before the fire completely
extinguished.
One of Wheeler's neighbors is Harold's Heavy-Duty Equipment Company,
immediately adjacent, somewhat downhill, and usually downwind from Wheeler's Tire
Disposal. For three months before the tire fire, Harold had been protesting to city, state,
and federal authorities that the noise and fumes from Wheeler's disposal yard interfered
with Harold's ability to do business and endangered Harold's employees' and customers'
health.
Occasionally, oil released during the processing of tires at Wheeler's ran down
onto Harold's property. That flow of oil onto Harold's became a flood on the day right
after Wheeler's fire.
Another neighbor who found Wheeler's lot particularly offensive was A.J.'s
Plumbing Supply, a retail and wholesale supplier of bathroom and kitchen plumbing
fixtures (along with the piping they require) for homes and businesses, owned and
operated by brothers AI and Joe Basin. The brothers thought that Wheeler's tire disposal
activities were so obnoxious and that potential customers were staying away from their
plumbing supply business.
More, highly vocal complaints against Wheeler's normal tire-disposal operations
had been made long before the fire at Wheeler's by Victor Barbon, revivalist founder of
the Ribiera Mariners' Cathedral, which faces the River, a few blocks downwind from
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Wheeler's. For many months before fire, Barbon gained attention from the news media
in Friendship City with charges that the" stench and racket" from Wheeler's were
deterring from "finding God and salvation" and from making donations to benefit
seafarers and support Barbon's ministry. After the fire at Wheeler's, Barbon protested
further that the traffic congestion of police and fire vehicles, together with the unending
stream of traffic detoured off the damaged interstate highway and through the
neighborhood of the cathedral, deprived its regular parishioners of parking spaces and,
therefore, the cathedral of regular income from their pledges. In addition, smoke from
the fire damaged some tapestries hanging in the cathedral, and vibration from the
increased traffic passing the cathedral caused its steeple to collapse onto the overhead
interstate highway, making the cathedral potentially liable to Friendship City for the
resulting cleanup costs and extra traffic management costs aattributable to this collapse.
The local office of the federal Environmental Protection Agency (EPA) agreed
with these and other complaints. The EPA ordered Wheeler's to cease its tire disposal
activities at the Friendship City location as of the next day, 18, and to clear all scrap tires
from this lot as soon as possible thereafter. The April 17 fire complicated enforcement of
the EPA's order. Friendship City Fire Department officials speculated publicly that Walt
Wheeler's fire almost certainly had been intentionally set. Many skeptical observers
noted that if Wheeler himself did not set the fire, then the other possible arsonistswhether strangers or Wheeler's relatives, friends, or enemies-actually had done him a
great favor, helping him out of a difficult business and legal situation and letting him
appear as an innocent victim of crime. Nonetheless, an adjuster for Wheeler's
commercial package property, business interruption, and liability insurer telephoned Walt
a few days after this speculation appeared in the media. The adjuster told Walt that the
insurer was considering issuing a reservation of rights letter before defending any firerelated liability claims against Wheeler or his company and was contemplating denying
all property coverage because of arson committed by, or at the direction of, the insured.
Part of Wheeler's Friendship City tire disposal yard lay beneath an interstate
highway that passes above the streets of the city on a series of overpasses. Consequently,
the intense heat rising from the burning tires buckled the steel girders supporting this
aging overpass and snapped the stee1 reinforcing rods in its roadbed. Federal and city
authorities closed this section of the interstate for five weeks until the overpass could be
repaired. With the interstate no longer available, commuters had to find new routes or
transport alternatives.
This fire, together with its fierce heat and noxious smoke, imposed many
accidental losses on hundreds of individuals and organizations. For the educational
purposes of this text, it is sufficient to focus on how this fire caused serious losses to just
ten of the many affected entities:

Material taken from The Essentials of Risk Management by Head & Horn
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Discuss possible damage to the following businesses and
organizations in the Ribiera area and in or near Friendship City:
1) Wheeler’s Tire Disposal, Inc.
2) Harold’s Heavy-Duty Equipment Company
[Rents and sells heavy equipment]
3) A.J.’s Plumbing Supplies [About to have a big, two week sale]
4) The Ribiera Mariner’s Cathedral [Historic church serving the waterfront
section of the city, including boarding merchant mariners in transit]
5) Romano’s on the Ribiera [Italian Restaurant]
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6) Sheltering Arms Hospital [Private, for-profit general hospital]
7) Friendship City Port Authority [Operates toll bridges in Friendship City
and the airport]
8) Friendship City [City services including police, fire; Departments of:
Licenses, Inspections, Taxes (property and sales), and Water]
9) Aunt Melinda’s Cookie Company
[Has contract to supply cookies to Destiny Airlines at the airport – 50,000
individually wrapped, fresh cookies a day by 6:00 AM, every day]
10) Schneller Transport Company [Common carrier shipping firm that
advertised that it could make deliveries into and out of Friendship City
without difficulties. Advertised this heavily immediately after the fire
and got many new customers]
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