DESPITE the escalation in insurance costs, terminal managers can help ease the problem by evaluating their insurance requirements and using the information to obtain appropriate coverage. One way is to take a look at contractual risk considerations.
Charles Philpott and Kurt Tentinger of Aon Natural Resources, Houston, Texas, discussed insurance and risk management as companies deal with current market demands.
Tentinger noted that adequate coverage is needed to cover the risks that may not be immediately apparent. A company review may identify risks such as flood, wind, earthquake, and terrorism. Product co-mingling may not be covered by a policy unless specified. Sabotage may be excluded if not provided by a rider. “Risk management strategy has to be in place,” he said.
“Review contracts with customers,” Philpott said. “Limit financial responsibility for product stored. Review contracts with subordinates. Verify via certificate of insurance that subcontractors' insurers list your company as additional insured, provide you with a waiver of subrogation, confirm insurance is primary, and that your insurance is non-contributory.”
Philpott pointed out that losses at terminals often come from non-employees who are on the premises, such as truck drivers and construction crews.
Another problem is related to pipelines on the site that are not owned by the terminal. Philpott recommended that contracts limit and control responsibility for pipeline maintenance. Emergency response also should be clearly defined in pipeline contracts.
Philpott reminded managers to begin the reinsurance process early, not to wait until the deadline is approaching, and to gather information from a variety of insurers. Tentinger advised an alternative plan be in place in the event initial negotiations fail. He also cautioned against filing an incomplete submission, suggesting that insurance agents may lay it aside in favor of those that are complete, thus delaying the process.
Tentinger reminded managers to do their homework, be prepared, and prepare others in management so that they understand the coverage that is in place.