SITUATION
The Amigo Company manufactures motorized wheelchairs in its Bridgeport, Michigan, plant, under the supervision of Alden Thieme. Alden is the brother of the firm's founder, Allen Thieme. The company has 100 employees and does $10 million in sales a year. Like many other fi rms, Amigo is faced with increased liability insurance costs. Although Alden is contemplating dropping all coverage, he realizes that the users of the fi rm's product are individuals who have already suffered physical and emotional pain. Therefore, if an accident occurred and resulted in a liability suit, a jury might be strongly tempted to favor the plaintiff. In fact, the company is currently facing litigation. A woman in an Amigo wheelchair was killed by a car on the street. Because the driver of the car had no insurance, Amigo was sued.

Question 1 Do you agree that the type of customer to whom the Amigo Company sells should influence its decision regarding insurance?

Question 2 In what way, if any, should the outcome of the current litigation affect Amigo's decision about renewing its insurance coverage?

Question 3 What options does Amigo have if it drops all insurance coverage? What is your recommendation?