Risk Management

This column uses fictitious case histories to introduce important loss-control principles. The details for these case histories are not meant to represent any particular occurrence. Any similarities to living people or actual events are purely coincidental.

Rocket Roofing was a disaster waiting to happen. The company had 40 employees and a $10 million sales volume. Ron, Rocket Roofing's owner, took over the company from his father about five years ago. At about the same time, the company's loss ratio started to increase.

Ron did not encourage safety with his crews. Although he knew about Occupational Safety and Health Administration regulations, neither he nor his foremen made any effort to comply. Ron's lack of commitment to safety showed in many areas but most clearly was reflected in Rocket Roofing's claim experience in all lines of insurance. For example, during a three-year period, six employees suffered serious falls, including one that resulted in death.

In addition, two automobile liability claims resulted when employees driving company vehicles rear-ended a car and struck a pedestrian. During a routine insurance audit, Ed, a loss-control representative, found that Rocket Roofing does not order Motor Vehicle Reports (MVRs) on new hires or existing employees.

The company also recently had two general liability claims—one for water damage on a project and another for a pedestrian who was injured when she slipped and fell on ballast that had fallen from a roof during surfacing.

Ed knew it would be difficult to renew the company's insurance coverages with its current insurer. He worked with Ron's insurance agent to prepare an early renewal submission and planned a meeting.

Ron and his agent met at the insurance company with Ed and a branch underwriter. Because of the current hardening insurance market and insurance company's new, more stringent underwriting guidelines, the company had to issue a nonrenewal notice to Rocket Roofing. The underwriter told Ron many losses could have been avoided had he established a formal safety program and company safety culture.

Remembering how his father and grandfather worked tirelessly to build the business, Ron did not want their efforts to be wasted or to lose his company because he was lax about safety. Ron also knew he couldn't continue to afford increasing premiums.

Ron asked how he could remedy the situation and renew his insurance. After considering the situation, the underwriter told Ron he had 90 days to improve Rocket Roofing's safety. If job-site inspections within the 90-day time period showed the company still lacked a commitment to safety, the nonrenewal notice would stand.

Ed agreed to help Ron set up a safety program and made other recommendations that would improve Rocket Roofing's safety record. The insurance company required Ron to provide written responses about the status of each of Ed's recommendations within 30 days.

Ed said a good safety program starts with a commitment from top management and it is imperative employees stay focused on the importance of safety. If there is a single weak link in Ron's and, subsequently, his foremen's commitment, the whole program will fail.

Ron was told foremen and roofing workers must be held accountable for their actions and accidents. Therefore, creating a strict disciplinary program would help reinforce management's safety policy and procedures. In addition, an incentive program should be established to reward good behavior and boost morale.

Ed also said just having a written safety program is not enough. The company must adopt a safety culture. Although the culture would take time to establish, Ron was told he must consistently meet with employees to instill and reinforce the message. If they see he is serious and committed to safety, they will be, too.

Ed required MVRs to be obtained annually for all company drivers. He said it also was necessary to establish a system for evaluating drivers' eligibilities based on MVRs.

And finally, Ed mentioned that maintaining safe, clean job sites greatly will reduce the probability of receiving claims from pedestrians and employees.

Ron's interest in safety completely changed because of the threat of losing his company. He resolved to be vigilant about safety.

Leslie Kazmierowski is NRCA's insurance programs manager.