Prevent, Learn, Maximize: Lessons from Large Losses

PLM Large Loss Overview

In a high severity segment like the lumber niche, we have seen our share of large losses over the years. Large loss claims carry significant risk and scrutiny beyond traditional commercial insurance claims. These types of insurance claims typically include multiple parties, complex legal issues, and potentially tens of thousands of discovery documents. Our best practices, developed after years of large loss experience, ensure a smooth process from beginning to end.

With that, we put emphasis on consulting with our insureds and brokers, as well as educating the industry on the best risk management practices. One of the primary things we do internally is have monthly large loss meetings where management teams from various departments including underwriting, loss control, business development, and claims come together and take a deeper look into some of the larger losses we have seen on our books. During these monthly meetings, we analyze and evaluate losses from every perspective, whether the coverage in place was adequate, if safety measures and processes were enforced, and what could have been done to prevent the loss.

In the past, we have informally spoken about these types of potential large losses, but we felt it was more appropriate to formalize our communication to you on the loss experiences we are seeing on a global scale to better equip you on a more frequent basis as weather patterns continually change and become more severe, costs to rebuild and repair are growing increasingly higher, and as supply chain issues and other economic factors continue to disrupt our industry. We want to continue to educate our brokers so they can help their clients prevent losses, learn from losses of others, and improve their loss history from lessons learned, which will ultimately support their bottom line.

Lessons from Large Losses:

 Improper Loading

Details: The insured supposedly overloaded a customer vehicle. The customer was on the highway looking to pull over to address the load issue when another compact vehicle went under the trailer, killing a 14-year-old girl. $100,000 incurred loss.

Although this specific loss is six figures, we’ve seen seven figure losses for similar losses. This loss could have been avoided if proper procedures and controls had been in place. There is technology on the market that businesses can install in their trucks that will allow them to accurately weigh/balance their load on their truck before they leave a location. In addition, one should check their load at least at the 50-mile mark.

Procedures for loading and unloading, training, and documentation for loading and unloading of weight should be noted. Proper loading and unloading starts with proper training of the driver. Improper loading accounts for hundreds of serious truck accidents yearly in the United States—and we’re looking at $2-3 billion on average of what’s paid out yearly for commercial auto losses.

Do your clients feel comfortable with their loading and unloading practices?  Unsure?  Contact us for more resources on proper loading and unloading.

Old Extension Cords

Details:  Old extension cords caused total fire loss. $337,980 incurred loss. 

At times, some clients overlook maintenance issues to reduce costs to their business. However, overlooking maintenance matters can end up being a costly mistake down the line as in this loss scenario. Again, this loss was a six-figure one, but we have seen similar losses that have been seven-figures.

Using old extension cords until one believes they’re no good is not best practice. We are frequently seeing claims where an electrical cord’s outer protective sheathing is no longer protecting the wiring of the cord, or where an insured has wrapped some tape around the fraying cord.

 Electrical issues are the number one reason for property losses. Ensuring electrical risks are properly maintained should be top of mind. Extension cords are not that expensive to buy in comparison to the cost of a loss to their business.

 Final Food for Thought:

Top Cause of Business Insurance Loss: Fire

 Commercial properties see a myriad of losses, but fire is the number one loss driver—and electrical risks tend to be the cause. The insurance industry has seen over $10 billion in loss dollars in the United States, and one in every four fires losses are with manufacturing and industrial type of structures.

The lumber and wood niche are high risk for these types of fire losses. Many businesses in this industry tend to have in-house maintenance teams. Without proper training of their people and maintenance upkeep, faulty workmanship and maintenance incidents will continue to happen. When their business incurs a fire, it is not only impacting the structure of the building, but the contents inside, the operation of their business, the rebuild of the damaged structure, and potential injuries.

Some questions to consider: Is your client’s building properly valued and in-line with the increase in the cost of construction and inflation? Are they prepared for supply chain issues? Is their business interruption in-line to the operation? Do they have a business continuity plan in place? Do they have a disaster recovery plan in place for such loss, and proper egress to ensure everyone can safely and quickly evacuate the building? Do they have a point of contact person to drive safety procedures and conduct drills to ensure all employees are aware of what they need to do in the event of such loss?

Contact PLM

Lessons from Large Losses is a true account of actual large loss situations. Our goal in sharing these real-life situations is to better educate our insureds and brokers in hopes of ultimately reducing risk. Equally, we want to create an ongoing dialogue where we can openly discuss and regularly share lessons learned. Is there something specific that you are looking to prevent? If you have any feedback concerning the article or follow-up questions, please email Veronica Wilkins at vwilkins@plmins.com.