Temperature Sensitive Transportation Know the Risks. IMUA ANNUAL MEETING May 23, 2017 Russell Crooks

Transcription

1 Temperature Sensitive Transportation Know the Risks IMUA ANNUAL MEETING May 23, 2017 Russell Crooks

2 Disclaimer The material presented herein is not intended to provide legal, professional or other expert advice as to any of the subjects mentioned, but rather is presented for general information only. You should consult knowledgeable legal counsel or other knowledgeable professionals and experts as to any legal or technical questions you may have. Further, any insurance discussed is a product summary only. For actual terms and conditions of any insurance product, please refer to the policy. Coverage may not be available in all states. The opinions and positions expressed in this report are the authors own and not those of Chubb. This presentation is solely for informational purposes. It is not intended as legal advice. It may not be copied or disseminated in any way without Chubb s written permission. The description(s) and material(s) contained herein shall not provide a basis for a legal relationship between Chubb and any potential or existing customer and gives no cause to anyone for claims, demands, assertions or other rights towards Chubb or the insurance companies of Chubb, either on a contractual or on a non-contractual basis.

3 Key Objectives Understand Food Safety Modernization Act requirements Review underwriting best practices regarding temperature sensitive commodities. Review of two risks, to understand risk factors in a practical application. Discuss lessons learned from claims.

4 Food Safety Modernization Act (FSMA) Background: According to CDC every year in the US 1 in 6 get sick, 148,000 are hospitalized and 3,000 die from food borne illnesses. Sec. 111 Sanitary Transportation of Food: Addresses implementation of Sanitary Food Transportation Act of 2005 Requires persons engaged in food transportation to use sanitary transportation practices to ensure that food is not transported under conditions that may render it adulterated. FDA primary responsibility, with enforcement joint among FDA, USDA and DHS, along with state and local authorities.

5 Food Safety Modernization Act (FSMA) Shippers Responsibilities: Covered Facilities must establish a written food safety plan Required to inspect trailers for contaminants prior to loading Shippers must have hand washing facilities around food handling areas. Transporter Responsibilities: Food Transportation companies with revenue > $500,000.

6 FSMA- Transporter Responsibilities Temperature Control/Tracking Storage compartments must be precooled and have a temperature monitoring device and shippers must define the temperature to carriers. Cleanliness Carriers must keep their equipment in a sanitary condition. Shippers must have hand washing facilities around food handling areas.

7 FSMA- Transporter Responsibilities Certification of Temperatures Carrier must provide a data log of the temperature reading throughout the shipment if requested. Training Carrier must provide basic sanitary transportation training to their personnel. Data Retention Carriers must retain the data for at least 12 months.

8 Seven C s of Underwriting Temperature Sensitive Risks Control Management practices & procedures Cold chain procedures followed? Online employee reviews: Glass Door, Indeed (buzzwords) Who is in charge? Cash Flow Financial trend Cash position

9 Seven C s of Underwriting Temperature Sensitive Risks Cargo Cooled 15 to 25 degrees Celsius. Pharma liquids and tablets to confectionary chocolates Chilled 2 to 8 degrees Celsius. Products must not freeze or get too warm- Pharma colloidal suspension, similar to chilled meats

10 Seven C s of Underwriting Temperature Sensitive Risks Cargo Frozen Colder than minus 18 degrees Celsius. Products sensitive to fluctuation and need a cold base. Blood and ice cream. book

11 11 Seven C s of Underwriting Temperature Sensitive Risks Contracts Liability Valuation Claims History Trends

12 12 Seven C s of Underwriting Temperature Sensitive Risks Continent Distance At rest Care Fleet Maintenance

13 13 New Business Comparisons ABC Transportation, Inc. (from Application) In business 8 years, San Francisco bay area based Products hauled are fresh and frozen fruits and vegetables 80%, meats 20% Radius is 1000 miles max, 250 average Limit requested is $2,500,000. Deductibles requested are $2,500 and $2,500 for reefer breakdown

14 14 New Business Comparisons ABC Transportation, Inc. (from Application) Total gross receipts are $13,000,000 upcoming year and were $12,750,000 prior year Average and maximum distance are both 500 miles There are 120 total units, average fleet age is 10 years. They have a regular maintenance program in place. They have a driver recruitment process in place and driver motor vehicle records (MVR) are verified regularly. Vehicles have no extra security measures There are no subhaulers or owner operators

15 New Business Comparisons ABC Transportation, Inc. Vehicles are not loaded overnight. They have a terminal in the San Francisco bay area and have both fire protection and security systems in place. The loss runs show 6 claims for the last 3 years totaling $386,524 with $126,314 coming from collision/overturn, $211,210 for 3 refrigeration breakdown claims, and a recent theft is reserved at $49,000. The insured hauls 95% under contract. The sample copy of a contract sent shows full invoice value liability.

16 New Business Comparisons ABC Transportation, Inc. Broker narrative indicates insured hired safety manager a year ago and she has made great strides in improving the operation of the insured. The insured maintains their fleet and trailers according to manufacturer specifications. The insured works with a local truck wash facility to ensure they comply with state and federal laws. The insured is financially stable and pays their bills on time.

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24 24 New Business Comparisons XYZ Refrigerated, Inc. (from Application) In business 33 years, Atlanta area based Products hauled are frozen fruits and vegetables 95%, frozen meats 5%. Radius is 600 miles max, 250 average Limit requested is $500,000. Deductibles requested are $5,000 and $5,000 for Reefer breakdown

25 25 New Business Comparisons XYZ Refrigerated, Inc. (from Application) Total gross receipts are $26,500,000 current year and were $25,425,000 prior year There are 190 total units They have a regular maintenance program in place with 2 maintenance shops, 1 in Atlanta, 1 in North Carolina. They have a driver recruitment process in place and drivers MVR s are verified regularly. Every new driver must go through a 30 day training. Vehicles have extra security measures, and they have 24 hour remote temperature monitoring with driver alerts.

26 New Business Comparisons XYZ Refrigerated, Inc. (from Application) There are 5 owner operators that haul primarily for XYZ Refrigerated. Vehicles are not left loaded overnight. They have 4 terminals in the Southeast and have both fire protection and security systems in place. None of the terminals are within 50 miles of the coast and are not in flood plains. 2 terminals also have maintenance facilities. Copies of recent audited financials have been sent in and the financials show a profitable operation with a good cash position.

27 New Business Comparisons XYZ Refrigeration, Inc. The loss runs shows 1 claim for the last 3 years totaling $41,388 coming from a collision, the claim is being subrogated. The insured hauls 90% under contract. The sample copy of a contract sent shows full invoice value liability.

28 New Business Comparisons XYZ Refrigeration, Inc. Broker narrative states that the insured is a 2nd generation family business that has focused on Southeast U.S., limiting their operations to refrigerated transportation of food products. Their fleet age is a little under 3 years old and the insured has a regular scheduled maintenance program and the units undergo maintenance at regular intervals when the drivers are not on duty. The insured has won safe fleet awards from their auto liability carrier, and from various trucking associations. The broker has included a copy of the driver training handbook and the employee manual.

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35 Underwriting Lessons From Claims- #1 Apple Butter Logistics Insured picked up a load of 100 barrels of Apple Butter, valued at $125,000 in NY. No temperature requirements on the bill of lading or on the rate confirmation from the freight broker. Driver inquired of the shipping staff what temperature was required for the shipment and was told the product was to be transported at -5 degrees. Product delivered 2 days later in Chicago, IL and arrived frozen. Shipment was rejected for improper temperature.

36 Underwriting Lessons From Claims- #1 Lessons Ensure trucking firm has written procedures for drivers regarding load acceptance that includes written temperature instructions on the bill of lading, and notifying dispatch of the situation. Written procedures must have consequences for not following directions.

37 Underwriting Lessons From Claims- #2 Bugsy s Reefer Transport Insured picked up 2500 boxes of fine European candies from Baltimore with a shipment value of $130,000. The temperature was required to be set between 55 and 65 degrees. The shipment was delivered the next day in Atlanta, GA. Upon inspection the consignee noted an infestation of insects in the shipment. The insured, the surveyor, the consignee and the freight broker agreed to work the problem together. The goods were placed in a temperature sensitive warehouse for inspection. The inspection revealed the insects were outside of the boxes of candies and had not infiltrated product.

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40 Underwriting Lessons From Claims- #2 The load was subsequently fumigated, repalletized and the freight broker arranged for the load to be delivered to consignee, who accepted the shipment. Total expense $5,000. Total savings: $125,000. Lessons Complete rejection of refrigerated shipments is not a given. Proper claims handling can mitigate loss. Communication is essential.

41 Underwriting Lessons From Claims- #3 Broken Promise Transport 5000 cases of packaged fine deli meats worth $131,000 picked up from a Northern CA shipper and delivery scheduled for Southern CA distribution center. Driver was accustomed to delivering twice a week to a specific distribution warehouse, this has been the scenario for the last couple of years and was familiar to the checkpoint personnel. When driver arrived at checkpoint, he was waived through without having his paperwork reviewed. He arrived at the dock and distribution center staff broke the seal prior to checking the paperwork.

42 Underwriting Lessons From Claims- #3 Distribution center supervisor reviews paperwork and determines the shipment incorrectly delivered and they reseal the shipment. Driver leaves and goes to the intended destination in the same general vicinity. Warehouse personnel determine the seal is incorrect for the shipment and promptly reject the shipment due to the seal being broken and potential contamination. What are your thoughts on this situation?