"AT YOUR OWN RISK"
Protecting High Risk Cargo
by Peter Schlactus, CIC, AAI [ Back To Table Of Contents ]
driver has just called in -- out of breath, practically screaming over the line:
"They robbed me, the bastards.
Stole my van. Got everything! I was inside for just a minute dropping off so-and-so's package and...Sh--!"
No matter how you view it,
this is not good news. However, depending upon your business practices and
insurance, it can be much better -- or much worse.
Obviously the nature of
the cargo you were transporting makes a difference: What exactly was in the van?
many different customers' goods were there? How easily can the lost items be replaced? How serious are the
consequences if they don't reach their destinations on-time?
Equally important is how
you have defined your liability with the customer(s) involved. What was your
about who would be responsible for this kind of loss? What documentation is there to back you up? Do you use a
"bill of lading" or "delivery receipt" or do you have a contract with the customer(s)? Does this (or any other document)
contain language limiting your liability in case of loss? Did your people request and obtain declared values? Did the
customer at the pick-up location sign a receipt and manifest?
Inquiring minds (e.g. underwriters, adjusters, lawyers, etc.) want to know.
Finally, there is the
insurance factor. Do you have cargo insurance? Is it off-the-shelf 'Motor Truck
usually contains many limitations and restrictions not suitable to a courier service) or is it a specialized courier policy?
Does it matter if you have not obtained declared values? Will it only cover you if you are legally liable for the loss (in
this case of robbery you may not be)?
You who sell
transportation services are common or contract carriers under the law. In your
industry the law protects
mainly the buyer. Therefore you must expect to be held responsible for most problems with your customers' shipments --
unless you carefully prepare beforehand.
All too often the
magnitude of the risks you are taking is not recognized. All too often standard
insurance will fail you,
and even specialized insurance requires you to take precautions and obtain declared values.
You should regularly
consult with your insurance agent and/or attorney regarding new and special
kinds of deliveries
you are making. Finally, you CAN limit your liability and substantially reduce the risk of a loss - if you commit your
company to the task.
In the course of one
column we cannot thoroughly cover every point raised above. Instead, we will
point out some types
of deliveries that carry a greater-than-normal risk and suggest broad approaches you can use to reduce those risks. Future
columns may delve more deeply into specific areas if readers desire -- please contact me or the editor.
Let's face it. These days
most couriers carry much more than envelopes, documents, and innocuous small
most couriers are actively seeking ways to expand the types of deliveries they make. Your challenge is to expand your
business without threatening its very existence by taking on risks and obligations you are not prepared to meet.
High-risk deliveries fall
into two categories: "special care" and "I don't care, it's not
worth it." Most opportunities fall into
the first category, but it is vital to recognize that there are some kinds of deliveries that your business simply is not equipped
to make -- at least not with any degree of security. Details will vary depending on what delivery methods you use, but certain
business deserves to be turned down by practically any courier.
One example is the ATM
Machine sweep. This scenario is starting to pop up with greater frequency as
banks look for yet
another way to cut costs, in this case the cost of an armored car service. A colleague of mine told me recently that he strongly
advises his clients to refuse the work, and I must agree. There is simply too great a risk of suffering a large loss.
ATM's are like sitting
ducks for theft rings -- easy to stake out and lightly guarded. Your guy shows
up at about the same
time each day -- very predictable. Maybe he wants in on the heist? Are there more bags in the vehicle? A few days of
observation will reveal all, and then...
In addition to the loss of
the cash, which is not covered under normal cargo
insurance, you need to consider injury to the
driver and the resulting Workers Compensation claim or lawsuit. You could arm your courier, but do you really want to assume
the liability for anyone caught in the cross-fire? There is a reason armored-car, services act and charge as they do.
As you think over your own
company's delivery work, are there perhaps other scenarios like this one?
pickups of high-value jewelry from a fancy store are sure to attract thieves' attention, cash deposits, jobs where you are forced
to leave a vehicle laden with valuable commodities unattended, the list goes on. Is the ongoing threat really worth the short-
The Case for Care
While some work is simply
a bad bet, most high-risk shipments fall into the "needs special care"
category. The type of care will
vary from case to case. Sometimes your people should take extra precautions. Sometimes you must demand that your customer
exercise special care. Sometimes you must protect yourself ahead of the time by including appropriate language on your delivery
receipt or contract of carriage, or by securing insurance for a particular customer or delivery. Often the best solution will be to
mix several or even all of these strategies.
Jewelry provides a perfect
example of a high-risk type of delivery that can shatter you if you are not
prepared, but that can be
fairly safe and profitable if you institute special handling procedures. In the last several months we have received an increasing
number of calls from clients asking how they can get extra protection for jewelry shipments. Of course, for every client that
calls to inquire, I assume that there are several more who are doing the same work but doing it blindly.
The phone call usually
involves a request for special insurance to meet the demands of the customer
(most cargo policies either
exclude or severely limit coverage for jewelry - as well as art, antiques, etc.). I ask about special care and typically receive a vague
answer. I then indicate a price range and pull back quickly so as not to lose an ear! "But," I add "if underwriters know that you
consistently take extra precautions to safeguard more valuable shipments, you can get coverage for much less."
The first step involves
training your order-takers that when they hear the word "jewelry" --
or "computers," "clothing," "spare
parts," "pharmaceuticals,'' or "package" for that matter --they need to inquire if the value of the goods is greater than your
normal limit of liability. If it is, they should ask for a declared value and offer to provide insurance at whatever rate you charge.
Declared values should be
communicated to the driver for inclusion on the delivery ticket/slip/receipt.
And remember to get a
signature on both ends. In many cases that are decided against the courier - I recall one involving a dropped refrigerator - there
is a problem with or lack of signatures.
The process becomes a lot
easier if your limit of liability is something more realistic than the customary
$100. It does not take
much these days for a non-paper shipment to be worth more than that. Consider adopting a higher limit, say $250 or $500 or
even $1000. Not only will it save time if fewer shipments require declared values, but also in the event of a loss a higher limit
carries more legitimacy. After all, if something was that expensive it was reasonable to ask for advance warning so that special
precautions could have been taken.
Returning to our jewelry
example, you have many options for safeguarding the shipment. You can use a
non-stop run to prevent
the items from ever being left unattended. You can use more experienced and trustworthy personnel depending on the values
involved. You can make sure the bag is innocent-looking, not a felt jewelry bag! You can vary the people you use and the timing
of your deliveries. With other high-risk, high-value commodities the process is much the same. Use secure vehicles equipped
with straps or nets to secure the load and vehicles where cargo is not visible from outside. Emphasize to your driver or biker
that you can't afford a crash so they won't take chances. Sometimes a second pair of arms and eyes is indispensable if you
would otherwise have to leave a loaded vehicle unattended.
In This Together
The example above shows
how you can make a big difference in controlling risk by
changing the way you handle high-value
and target commodities. In other situations, it is the customer who can make the greatest difference. Where this is so, couriers
would be wise to insist that the customer guarantee certain practices as a condition for accepting the work.
If the customer fails to
do its part, you the courier should be exonerated from the cost of any loss.
This is not arrogance, it's
common sense. You and the customer are in this together, and organizations - like people - tend to perform better with the
proper incentives in place.
The easiest way to establish safety rules with your customers is with a written agreement or contract.
One clear example is the
common bank deposit delivery, where you carry a business' daily bank deposit to
the nearest branch
and submit it to the teller on your customer's behalf. The risk comes from thieves who stake out bank branches, looking for
patrons who follow regular patterns. Not knowing whether or not cash is involved they target unlucky couriers for a hold-up.
Often there is nothing negotiable to steal, but by the time the thieves find this out they are miles away. The "worthless" bags
are tossed into the nearest garbage bin and may never be recovered.
Could you have taken steps
to prevent this loss? Perhaps you could have varied your messenger more, but
often demands that deliveries be made at about the same time each day to the same branch. Transparent bags could show a
would-be robber that no cash is involved, but sometimes a customer does slip in some cash. Your room to maneuver is limited.
Your customer, however,
can easily mitigate the effects of a loss by taking a few basic precautions,
such as stamping all
checks "for deposit only" and keeping records of checks that allow for simple reconstruction. It is hard to overestimate the
difference that these measures make in determining the size of a loss. If you and the customer agree to these practices and
they slip up, why should you be responsible?
If the customer cannot
comply because, for example, it is a supermarket that does not record individual
checks, then perhaps
it will hold you harmless for loss beyond a certain reasonable point. Or perhaps you should pass up this work.
The easiest way to
establish safety rules with your customers is with a written agreement or
contract. One courier we know
follows the admirable practice of having every new customer sign and fax back a "Transportation Agreement" prior to pickup.
Given the power and flexibility of today's computers it would not be difficult to vary the contract somewhat to fit the type of
account. Keep in mind that this is but one example of how a customer's actions can make a difference. Other high-risk deliveries
will call for other measures like proper packing or secure loading areas. Sometimes it is best to let the customer handle the
loading and unloading.
Heed the Consequences
Our last example involves
a mother who was killed in an automobile accident. Her family sued the other
driver for a lot of
money. Their lawyers hired our client to carry an important brief to the court, where it had to be delivered that day by a
specified time. Needless to say the driver got "distracted" (by what is still being determined) and the brief arrived late. The
case was dismissed. As you may have guessed, the law firm is claiming negligence and suing our client for well into six digits.
This type of loss is
called a "consequential loss" or "loss due to delay." By not
completing the delivery as arranged, someone
suffered damaging consequences. It has nothing to do with the intrinsic value of the shipment, in this case a piece of paper
with ink, nor can the situation be remedied by replacing or reconstructing the shipment. The only recourse for the injured
party is to "work something out" or sue.
Of course you can't avoid time-critical shipments. What then is to be done? Again we return to our three strategies.
Special precautions you
can take include training order-takers and dispatchers to recognize
time-critical shipments and
assign the most trustworthy drivers to a non-stop run if possible. Often just an extra word to the driver is enough to
deter any "distractions." As for your customer, once they let you know their needs there is not much else they can do.
For this type of high-risk
delivery the emphasis needs to be on protecting yourself in advance (strategy 3)
language on your delivery tickets, manifests, contracts, and other documents. It is customary to use language to the effect
that you will not be responsible for consequential losses at all and, if the customer signs off on this, you have a good
defense even though you can never prevent a lawsuit.
Also, investigate whether
you can obtain protection for consequential losses on your cargo insurance
exclude this type of loss, but certain specialized policies will let you "buy back" the coverage. For example, a $25,000
limit should be relatively inexpensive and gives you room to settle in addition to paying your defense costs. The potential
legal bills alone make this coverage a worthwhile investment.
By now it should be clear
that this column's title is no exaggeration. From computer chips and jewelry, to
and financial institutions, to refrigerators and legal filings - high-risk deliveries happen every day. Couriers are transport-
ing more types of high-risk cargo and, according to numerous industry studies, professional cargo thieves are becoming
more bold, sophisticated, and effective each year.
As the seller of
transportation services to the public you must be aware of the risks you take
and prepare yourself
accordingly. Your first task is to do a better job at identifying high-risk deliveries when they are first ordered. Next, you
have three strategies you can employ depending on the circumstances.
First, set up special
procedures and precautions for your people to use whenever they handle a
Second, communicate with your customers about special steps they can take to safeguard special cargo. Third, review
your transit documents to make sure they clearly and consistently clarify your limits of liability.
If all this sounds like
too much, start by making a list of your ten largest customers and the ten
customers you feel give
you the riskiest work. Tackle these accounts first, and then use your experience to create broader policies and procedures
for your overall business. Your insurance broker should be of considerable assistance if he or she knows your industry.
Finally, check your
insurance to make sure it fits your business practices and provides you with
real protection. Look
closely at the fine print, beware of off-the-shelf "Motor Truck Cargo" polices, and look into extra protection for risks
such as consequential losses. By committing yourself to a cargo risk management regimen, you can prevent uninsured
cargo claims that force you to pay legal expenses and damages out of your own pocket. Perhaps more importantly, by
reducing losses you will have fewer angry customers. Moreover, the losses that do occur can be settled more quickly
and amicably when both parties know the rules. Over the long run, the courier companies that pay attention and protect
themselves will be the ones that succeed.
Peter Schlactus, a Certified Insurance Counselor and Accredited Advisor in Insurance, is Co-President of KBS International Corp., which provides specialized insurance programs, benefits, and risk management services to courier companies and executives nationwide. Mr. Schlactus is available to answer inquiries at 1-888-KBS-4321 or via e-mail at firstname.lastname@example.org.
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