Reducing risk

In the land of high risk industries, such as cranes and transport, high insurance costs plague everyone, and the rates seem to just climb each year. So what does it take to get those premiums down? Insurance is a difficult issue but with discipline, knowledge, caution and an agent that knows the market, there are a number of approaches a company can take to get those rates reduced. ACT invited insurance firm professionals that specialize in cranes and transport to share their knowledge and thoughts on how to help the industry and insurance costs.

This year's panel includes: Ellen Conner, CPCU, AIM, AAI, CWCC, senior account executive at Neace Lukens Insurance; Megan Rose, vice president of programs at JC Stevens Inc.; and Randy Proos, CIC, director of construction services at USI Inc.

What are the three most important loss prevention control measures that a transportation or crane owning company can take to lessen risk, prevent accidents and ultimately lower its insurance premiums?

Conner: Operator and driver understanding of the safety rules that govern the safe operation of equipment and vehicles would by far be the single most important loss control measure. Proper initial training along with frequent continuing education above CDL and CCO goes a long way in reducing accidents, promoting confidence in the work place and ultimately reducing the overall insurance costs.

Equipment safety and maintenance. A fleet that is maintained properly will not only serve to reduce needless accidents, but will also serve to reduce overall maintenance costs in the long run.

Job site assessment. Knowing what needs to be done and what it will take to safely engage valuable resources such as personnel and property prior to the start of a job.

A crane company in the Midwest that we insure was to perform a tandem lift with a very high-valued pick with unusual dimensions in a very windy location. In an effort to reduce the chance of an incident, a lift specialist was provided by the insurance carrier through Neace Lukens for a pre-job lift overview. The specialist was able to confirm proper ground-bearing pressure, confirmed reduction in capacities on both cranes due to tandem lift, confirmed wind folios and consulted an engineer on properly sized rigging. Th is unique partnering helped our client to successfully complete the job safely. In the event of a mishap, the carrier representative was on-site for immediate action.

Rose: The most important loss prevention measures that a crane operation should take are: Certified or updated cranes; CCO certified operators with at least two or more years of experience and knowing the limits of what their equipment can do. Premium credits are given when an entity follows these important safety features and recommendations.

Proos: From my vantage point, I would include the following as critical in terms of lowering risk and ultimately lowering insurance costs.

For crane and rigging companies, getting the contract language right is often overlooked. Th at means making sure your lease tickets and rental agreements contain up-to-date, state specific and enforceable terms and conditions that will seek to define each party's responsibility after an accident.

In Florida, after the Florida Crane Owners Council successfully lobbied on behalf of reinstituting “Horizontal Immunity,” we contacted Robert Moore, the architect of the SC&RA endorsed program lease agreement and he promptly incorporated some new language into the lease agreements of our Florida-based clients that served to maximize the protection afforded under the new law. In addition, some of the crane and rigging liability program carriers are now offering additional incentives, such as lower deductibles when you utilize their approved lease ticket language.

On a related topic, crane and rigging companies should carefully scrutinize the terms and conditions that they agree to in the master agreements that they sign with general contractors and subcontractors who hire their services. Typically, agreeing to hold a GC or any other party harmless for the sole negligence of the other party is never an acceptable condition. Courts can decide who is negligent but the contract language stipulates who pays for the claims and you don't want to be on the wrong side of the contract language.

Developing a safety culture that permeates every level of the company. Th at may seem to be a Pollyanna-type statement to make. However, I can tell you that in our client base of crane and rigging clients, the companies who successfully implement and maintain safety as a culture at a high level have fewer losses, which translates to lower insurance premiums.

Are there other - obvious and not so obvious - measures that crane and transport companies can take to reduce their insurance costs?

Conner: An obvious measure would be to engage a knowledgeable insurance agent with a good fit of insurance companies that specialize in the crane and transportation industries.

The monitoring of claims and claims costs with your agent on a quarterly basis would serve not only to keep you informed of any negative trends but could also identify areas in need of special attention or specific loss control measures.

Taking advantage of loss control services provided by your carrier and agent would be advantageous in the quest for lower insurance premiums.

During a quarterly claims review with a client crane company in the South, a trend was noticed for slipping or falling from and around equipment. It was determined after conversations with the insured's safety committee that better tie-off procedures were needed. An educational seminar was conducted at the insured's location by the carrier's loss control team. Claims for this type of incident were reduced by 54% immediately following the seminar.

Careful review of contracts. Not giving away your rights by contract and not agreeing to take on additional liability by contract is another very important step in reducing overall claims settlements and ultimately lowering insurance costs.

During a contract review for the same crane client in the South, it was recommended by Neace Lukens that the client remove certain wording in the contract that called for indemnification and waiver of subrogation for the contractor for claims arising out of the contractor's negligence. The insured took that advice and although there was substantial “push-back” by the contractor, he eventually agreed to remove the wording. On the job three months down the road, the contractor's noncertified employee attempted to move a crane and seriously injured another employee and did $125,000 in property damage. The total cost of the accident to date is $374,000. Th is amount could have been the responsibility of our insured and his carrier had the contract not been amended.

Having your agent verify your Workers Compensation Experience Modification Factor. In many cases, workers compensation individual claims amounts and aggregate claims amounts are not reported properly by the carriers and could negatively impact your experience modification factor.

With regard to the same client, verification of claims information was performed by Neace Lukens for the entire experience period which is three years prior to the current term. The successful result was a .04 immediate reduction in the insured's experience modification factor. In this case, the premium savings was approximately $42,000.

Rose: Drug testing, checking MVR records for past citations, DUI or DWI, because when you are dealing with a piece of equipment such as a crane, you need a qualified safety conscience person behind the wheel because cranes are heavy and can kill.

Proos: Not so obvious measures could include looking at insuring transportation assets (trucks and trailers) under contractors’ equipment floater policies for physical damage coverage. Traditional auto/trucking physical damage rates can cost in the range of 2 to 3 % of market value of the unit. Contractors’ equipment floater policies can in some cases cut that rate in half depending on the size of the fleet.

You may also want to look at discontinuing uninsured motorist coverage where possible. Uninsured motorist coverage applies when the insured vehicle is involved in an accident with an uninsured or underinsured vehicle that is at fault. If one of your employees is injured in your commercial vehicle workers’ compensation benefits will apply and provide for the medical bills and lost wages as provided under law. If you are carrying unnecessarily high uninsured motorist limits your injured employee may hire an attorney to sue your auto liability company. In effect your liability carrier would assume the position of the insurance company of the negligent party. Losses paid out under uninsured motorist coverage will be stated on your loss runs like any other loss paid out by your auto liability company.

Exceptions to this will be states that require specific compulsory uninsured motorist coverage. In addition, if you have principals, executives or managers that are furnished company vehicles for personal use you may look to carve out higher uninsured motorist limits for those vehicles only, since workers’ compensation coverage may not apply to accidents that occur during personal use of those vehicles.

What are the most important elements in claims reporting? Should a company establish set procedures in the case of claims reporting? Why is speed in the reporting process important?

Conner: Every company should have a claims reporting procedure that includes what to do in case of a workers’ compensation, liability, property and auto claims situation. It is extremely important for employees and others working on behalf of the company to know what to do, what to say, what not to say and how to handle themselves in a serious situation. Accurate facts should be reported to your agent and/or carrier as soon as possible following an incident. Speed is an important part of the reporting process as it allows the claims experts to review property and equipment, interview possible witnesses and mitigate any negative media in a timely fashion. Not reporting incidents timely could serve to jeopardize a company's rights for recovery.

Rose: Reporting the claim that day or even at the time of the incident. You cannot believe how many people do not report an incident at the time of the incident. I'm talking two weeks or even a month later and expect results that week. If the insured reports a claim right away, and the adjuster can get to the scene it may benefit the insured tremendously. If an adjuster cannot get out to the scene, we recommend the insured take full pictures of the incident and then write down their version of the incident while it is fresh in their minds.

How often should a company complete some sort of risk assessment program? What are the elements of a strong risk assessment program? Should risk assessment be done by a third-party?

Conner: In the high risk industries of crane and transportation, a risk assessment program should be reviewed at least annually. Risk assessment is an ongoing process that changes as the business changes, the laws governing business changes and the marketplace changes. Hazards that are both insurable and uninsurable (at least at a reasonable cost) should be identified and reasonable methods for controlling and containing or financing those hazards should be formulated. A third-party who is knowledgeable in the crane and transportation industries and in the insurance industry could be employed, however, engaging your own employees to become involved in the risk identification and risk management processes can be very beneficial to both the employees and the business.

In an effort to lower their insurance premiums, or at least stabilize them, what types of initiatives can you recommend to specialized transportation and crane operating companies? (i.e. safety training, driver education, certification, and other scheduled rate credits offered by insurers)

Conner: Safety training, driver training, certification, fleet safety program, drug testing and incentive programs all could serve to reduce costs and an overall program should be established on an individual company basis depending on the company and the resources available.

Example: A trucking company client in Ohio in partnership with Neace Lukens, created an incentive program that provided ten $50 gift certificates to drivers meeting certain criteria per quarter. Criteria included speed, violations, out of service and safety. All of these categories improved after implementation of the program.

Rose: Our programs offer different types of warranties and credits to lower one's insurance premiums. We have a warranty with Tudor Insurance (Rated A+9) where we can lower ones premium up to 20% if they accept certain guidelines: Always use proper straps, chains, etc.; and put their outriggers in while driving, and get a work ticket signed advising the weight of the item being lifted. Tudor also offers a deductible credit. Each year the insured is loss free, their deductible gets lowered each year. Our program wiThessex (rated A12), along with Tudor, offers premium credits for previous year loss free, clean MVRs, CCO operators.

Can establishing and maintaining a formal safety and training program help a company get better insurance rates? How does this work?

Conner: Establishing and maintaining formal safety and training programs are essential for getting the lowest rates from the preferred circle of insurance carriers. A company can be provided with a “shell” program for both safety and training that can be tailored to the needs of the individual company.

What should you look for when pursuing the right coverage and insurance company? How often should your insurance program be reviewed?

Conner: Specifically, a carrier should be AM Best Rated “A” or higher and should be licensed to do business in your state. The carrier should also have specialization in the crane and transportation arena and have claims representatives local to your area. Your agent will play a key role in the selection of carriers and the soundness of the overall insurance program. Your program should be monitored all year and reviewed in depth annually.

Rose: When looking for the right insurance company, you should consider all of the following: Can they offer you the coverage you need or may need midterm? Are they familiar with the type of operation they are writing? Since we are an MGA, and have been in the industry for over 40 years, we are aware of what types of coverage a crane operator needs or may need. We stay current with the over the road issue as some states are not accepting the GL for auto, and make it a point to get the coverage the insured needs. We also stay current with our rates. You may see some programs lower their rates and then raise their rates - this confuses risks. We stay current as we are in it for the long haul.

How can a company assure that its insurance coverage is comprehensive - that in the event of an accident there are no hidden surprises of incomplete coverage?

Conner: As stated above, your agent plays a key role in helping you understand your insurance program, what is typically covered and not covered, the application of deductibles, the choice of counsel should that become necessary and specific areas of concern for your industry. Neace Lukens is equipped with a proprietary “checklist” for the crane and transportation industries. A checklist should be reviewed at least annually with you to determine if there are any known hazards that are not adequately covered.

During a pre-renewal strategy meeting with a crane client in the Northeast, it was discovered that the insured had plans to do a lot of work on and over the water. Their equipment coverage had to be amended to remove the “over water” exclusion as well as the workers compensation coverage has to be amended to include USL&H and Maritime coverage. Coverage was amended immediately and the renewal went smoothly with no surprises.

Proos: While you can never be guaranteed that you have zero coverage gaps in your insurance program, you can certainly minimize exposure to incomplete coverage by utilizing programs and brokers who specialize in your industry. The SC&RA endorsed insurance program is a great example, and there are a handful of good competent brokers who specialize in insuring the crane and rigging, and heavy transport industries, many of whom have been long-time members of the SC&RA.

How important is it to contract with an insurance company that specializes in covering crane and transport industries, rather than just a general insurer?

Conner: It is essential to be covered with a carrier experienced in the crane and transportation industries. Most importantly at the time of a loss, the carrier's experience in the handling, negotiating and settling claims will serve to reduce the overall cost, time and frustration involved.

A crane company client in Ohio had considerable damage to a high valued crane. The crane was originally purchased four years ago for $1,850,000 but now has a replacement value of $2,200,000. The adjuster, experienced with current industry trends, adjusted the claim using the $2,200,000 value.

Rose: Th is is extremely important. We have had risk (not many) leave to go with another carrier due to the lower premiums. They then had a loss, and realized that the policy they had did not cover the loss. When the risk goes for a lower premium and not with a company that specializes in the field, they jeopardize their own company and livelihood. The risk wants to make sure they also are dealing with an agent familiar with the crane industry.

When the agent knows what the insured needs, it makes the process easier for an MGA to underwrite and get the coverage the risk needs up front. No risk likes to be charged midterm for added coverage needed - when you ask for it up front, it may even be cheaper than adding it midterm.

Proos: I believe it's critical to use industryspecific insurance professionals at every layer of your insurance program. The standard insurers do not have a detailed understanding of the crane and rigging industry, and their conventional approach to handling claims has proven woefully inadequate. In addition, the exposures faced within the scope of the crane and rigging industry are unique and the coverage forms and policies utilized must be tailored to properly cover those unique exposures.

The SC&RA endorsed program is a great example of a comprehensive industry-specific program with tailored coverage and a claims management team that understands precisely how to react to crane and rigging claims.

Your agent or broker needs to play a critical and complementary role the in the delivery of your insurance program. Th at role should not end after the placement of the insurance. A good industry specific broker will monitor legislative initiatives that could potentially affect the crane and rigging industry in the state in which you do business.

The broker should assist in the identification and selection of good and competent local adjusters and attorneys who in shock loss situations will be the initial immediate responders to the accident site. These local professionals should have experience in responding to crane and rigging accidents and be capable of deploying to accident sites in a matter of hours to relay critical information to your claims management team at their offices.