Evolving Risk Management Challenges In Transportation Presented by: Michael S. Brown TLC - San Diego Executive Vice President, Avalon Risk Management +1 (978) Premier Provider of Innovative Insurance and Surety Solutions
Copyright© Avalon Risk Management Cargo Losses and Claims Trends
Copyright© Avalon Risk Management US Cargo Theft 1) FL 2) TX 3) GA 4) CA 5) NJ
Copyright© Avalon Risk Management US Cargo Theft 199 Thefts Reported $133,711 Avg. Value
Copyright© Avalon Risk Management US Cargo Theft 61% of Thefts From Unsecured Parking
Copyright© Avalon Risk Management Mexican Cargo Theft 303 Thefts in Q % were hijackings Some highways deemed too dangerous for carriers 75 tons of grain stolen in one day Rail theft of scrap metal
Copyright© Avalon Risk Management 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 2 nd tracker remained functional State of Mexico Transportation Police intercepted truck within 45 minutes Thought to be first successful attempt to use jammers in Mexico
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management Hurricane Sandy – October 2012 Damage Estimates Now Total $50billion
Copyright© Avalon Risk Management Cat 3 – 109mph winds – 285 Fatalities 250,000 Cars Damaged
Copyright© Avalon Risk Management Avalon’s New York Office
Copyright© Avalon Risk Management Hurricane Sandy Cargo damaged/destroyed/delayed Significant impact on NY area businesses
Copyright© Avalon Risk Management MSC Flaminia
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management Vessel Damage Claims
Copyright© Avalon Risk Management Vessel Damage Claims
Copyright© Avalon Risk Management Vessel Damage Claims
Copyright© Avalon Risk Management Vessel Damage Claims
Copyright© Avalon Risk Management Vessel Damage Claims
Copyright© Avalon Risk Management What Can Be Done?
Copyright© Avalon Risk Management 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)
Copyright© Avalon Risk Management Carrier Qualification
Copyright© Avalon Risk Management Carrier Qualification AMotor Truck Cargo 5/1/125/1/13$100,000
Copyright© Avalon Risk Management Carrier Qualification
Copyright© Avalon Risk Management Broker Qualification Authority Verify Identity Insurance (E&O, Contingent Cargo, Contingent Auto, Limits?) Who writes Bond / Trust? Is Bond limit voluntarily higher? TIA Member?
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management 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
Copyright© Avalon Risk Management Thank you!