Evolving Risk Management Challenges In Transportation

Evolving Risk Management ChallengesIn Transportation

Presented by: Michael S. BrownTLC - San Diego - 2013

Executive Vice President, Avalon Risk [email protected] +1 (978) 607-0169

Premier Provider of Innovative Insurance and Surety Solutions

mailto:[email protected]

Copyright© Avalon Risk Management

Cargo Losses and Claims Trends


US Cargo Theft1) FL2) TX3) GA4) CA5) NJ


US Cargo Theft

199 Thefts Reported$133,711 Avg. Value


US Cargo Theft

61% of Thefts From Unsecured Parking


Mexican Cargo Theft

• 303 Thefts in Q1 2013• 61% were hijackings• Some highways deemed too dangerous for

carriers• 75 tons of grain stolen in one day• Rail theft of scrap metal


Jammer Assisted Hijacking• Truck containing consumer electronics components hijacked

in Tlalnepantla, Mexico March 5, 2013• Truck equipped with hard wired fleet tracking system & two

covert tracking devices• Hijackers placed cellular signal jammer in passenger cabin of

the truck• Fleet tracking system & one covert tracker were disabled• 2nd tracker remained functional• State of Mexico Transportation Police intercepted truck within

45 minutes• Thought to be first successful attempt to use jammers in

Mexico


Risk Management Challenges

• Vicarious liability & negligent selection claims• Hostage loads, carrier impersonation,

fraudulent drivers• Motor Carrier Insurance price competition

driving trend towards minimal coverage• Insurance Coverage transparency lacking


California Air Resources Board

• CARB regulations impacting reefer units (TRUs) now in effect

• Penalties for shippers, consignees, truckers, drivers & broker/forwarder nationwide that hires trucker (US$1,000 each)

• Clean truck regulation in effect for CA based companies as well

• Idling regulation expected in October


Hurricane Sandy – October 2012

Damage Estimates Now Total $50billion


Cat 3 – 109mph winds – 285 Fatalities

250,000 Cars Damaged


Avalon’s New York Office


Hurricane Sandy

• Cargo damaged/destroyed/delayed• Significant impact on NY area businesses


MSC Flaminia


MSC Flaminia

• Significant damage to vessel & cargo• Unloading of containers took significant time• Undamaged goods subject to market

fluctuations highlight need to consider insurance cover for delay


Vessel Damage Claims










What Can Be Done?


Carrier Qualification

• Authority & Safety Rating (Linhart v. Heyl)• Verify Identity (independent search)• Insurance (fraudulent certificates, appropriate

coverages, frequency of verification)• Other Considerations

– Credit– CSA Basics?– Insurance exclusions, warranties, scheduled

vehicle policies– Hints (GL coverage, coverage limits)





A Motor Truck Cargo 5/1/12 5/1/13 $100,000




Broker Qualification

• Authority• Verify Identity• Insurance (E&O, Contingent Cargo, Contingent

Auto, Limits?)• Who writes Bond / Trust?• Is Bond limit voluntarily higher?• TIA Member?


Communication & Cooperation

• Once Carrier / Broker vetted, verify that carrier retained actually picks up load– Communicate with shipper (Photo, DL#, unique

shipment ID, etc.)– Shipper authenticates

• Works in certain industries (pharma)• MAP-21 makes this easier by making

unauthorized re-brokering illegal


GPS Tracking

• Wide array of options• Some devices sense light, temperature• Automatic alerts for change in motion, route

deviation, door open, temperature change, etc.

• Consignee cooperation can reduce cost• Have a plan in place to deal with GPS alerts


Appropriate Degree of Control

• Too much control of driver can result in responsibility

• Regular driver communication, controlling route / manner of performing work, etc.

• Contrast between Hoffman v. Crane and Hayward v. C.H. Robinson


Contracts

• Use standard contracts• Don’t go too far

– Can invalidate subcontractor’s insurance– Indemnification for one’s own negligence

problematic– Additional insured status on Auto Liability

problematic• Model contracts available• Add CARB verbiage to contracts


Shipper’s Interest Insurance

• Coverage if carrier/subcontractor coverage fails

• Coverage for acts of god, general average, etc.• Full value door to door coverage air, ocean &

LTL moves• Regulatory defense protection may be

available


General Liability Coverage Territory

• Most US policies cover events in US, Canada, etc.

• Limited coverage for international waters/airspace

• Improper packing / securement exposure• Endorse your coverage territory• Verify that subcontractors like packers &

craters do this as well


Transportation Relationships

• 3PLs play a vital role in the process– Outsource transportation management– Efficiently add needed capacity

• Proper vetting important• Cooperation and information transparency

critical


Thank you!

Documents

Evolving Risk Management Challenges In Transportation