“Insurance Matters” Radio Interview with Dirk Duchscherer
“Insurance Matters” is broadcast every Saturday on News Talk 1480 KYOS in Merced, California. InterWest Insurance Services, Inc. sponsors this radio program to provide timely information on insurance issues affecting local businesses in Merced County. “Insurance Matters” regularly features interviews with industry experts, state and local government officials and specialists in management, human resources, organizational development and workers’ compensation.
Kevin O’Brien of Interwest conducted the following interview with Dirk J. Duchscherer of InterWest on July 14, 2005 to learn how insurance companies can best prepare clients for a safety and loss control survey.
O’Brien: Please describe your position with InterWest and explain what your main duties are.
Duchscherer: I am the Risk Control Manager, and my main duties include providing safety and loss control services for our commercial accounts and handling a self-insured pool of public schools in northern California. I conduct fire, liability, boiler and machinery onsite visits, and I answer technical questions related to public exposures and hazards within the schools.
O’Brien: Do you consider yourself an insurance specialist or generalist?
Duchscherer: My expertise is in public playground safety and farmers’ markets. Actually, I have written a number of articles on both subjects. However, I pride myself as being more of a specialist than a broad-based generalist, and I try to specialize in each line of coverage because my background covers all lines of commercial insurance. I think that helps many of our clients. Some professionals specialize in fire protection, fleet or workers’ compensation but with my background, I prefer to be more broad-based.
O’Brien: Please give our listeners some more information on your background.
Duchscherer: During my first year of college, I overheard someone talking about the Occupational Safety and Health Administration (OSHA), and I thought, “Wow! That sounds interesting!” From that point, I researched the safety and loss control field and learned about an undergraduate degree program in occupational safety and health. I earned this degree in the early 1980s, and then I pursued a Master of Science degree in industrial safety.
In college, I was fortunate enough to work two summer safety jobs. During the summer between my sophomore and junior years, I worked as a Seasonal Safety Technician for the National Park Service. I conducted training and camp inspections for the Youth and Young Adult Conservation Corps. Before my senior year, I worked for Westinghouse Hanford in the tri-cities area of Washington where I did mostly onsite safety and industrial hygiene work.
Since that time, I have gained several certifications and licenses. Most safety and loss control professionals try to obtain the Certified Safety Professional (CSP) designation, which I hold. I also have an Associate in Risk Management and a boiler and pressure vessel commission from the State of California, which allows me to inspect air tanks, propane tanks and high-pressure boilers.
O’Brien: How should businesses prepare for an insurance company safety and loss control survey?
Duchscherer: InterWest clients, non-clients, and general businesses can compile a lot of information to improve their risk or to build their portfolio so carriers for their type of business get a clear picture of who they are and what they do.
I worked for Travelers Insurance Company and Royal Insurance Company for 12 years, and two other loss control representatives and I developed a Best Practices Program for loss control and underwriting departments nationwide. We wanted to know what our representatives needed to do before they visited a client onsite and wrote a report. I was assigned to the pre-survey section of the program, so I think I can give clients some insight on today’s discussion.
Next, clients need to determine who is to perform the survey. They may receive an initial survey for their type of operation based on their class of business, loss history, or premium. Since carriers have had cutbacks, they may have a carrier loss control safety person, they may contract this function with a fee company, or they may contract with an independent consultant.
O’Brien: Should business owners expect California-OSHA (Cal-OSHA) to show up?
Duchscherer: Many businesses fear that Cal-OSHA will show up but in addition to the loss control survey, they will probably only come four times. However, they will come to a business if there have been serious injuries or fatalities, plant explosions, employee complaints, or if a business is on what I call the “targeted” or “hit” list in which Cal-OSHA selects three or four businesses for that particular year. Recently, dairies, home health care, and residential contractors have had high loss ratios.
Your odds of having an inspection, say as an office business, which is typically low exposure, may be one in 15 years because Cal-OSHA only has about one compliance officer for every 10,000 businesses but that is not the focus of this discussion. It is about helping you to become an attractive client for insurance purposes and to prepare you for any visits.
O’Brien: When an appointment has been made for this kind of onsite survey, what kind of information should a business owner or insured have ready?
Duchscherer: Many businesses are developing their own intranet or website, and I think this is an excellent idea. You can give the general public and insurance representatives a snapshot of your business, your facilities, and your company history. However, I also like to see a developed corporate brochure. The brochure can include company history and locations, annual revenue, pictures and other relative information.
O’Brien: What are the benefits of having a corporate narrative report?
Duchscherer: Most companies have an annual report that contains financial information. I like to break that information down based on the type of insurance that applies to the narrative. Corporate narratives create less work for your insurance agent or broker, and if potential carriers understand what you do and how you do it, your renewal quotes will be much smoother.
Also, when I worked on the carrier’s side, businesses would be out for bid, and we would do a pre-survey. Now the worst thing for an owner to see is six different people coming in at six different times. Obviously, that is time-consuming for the business, management, and employees. So if you do not have your materials available, work with your existing agent and broker because it will save you and your staff a lot of time. It may even make your business more attractive to some of the carriers’ underwriting departments, so that if you get a bid, they will move you up to the top of the list to look at your business for a quote.
O’Brien: What kind of insurance coverage information must be prepared for these surveys?
Duchscherer: Most if not all businesses have loss exposures from numerous lines of coverage. I would like to address each line of coverage, as this would typically be the method of review during a loss control survey.
Let’s begin with property insurance. Some items that would be most helpful to have prepared in advance are sketches and photographs of your buildings, any recent building appraisals or values and any recent modifications of equipment or reconstruction.
The next item would be your construction type. Do you have frame, metal or concrete structures? Also, what is the age of the buildings, and if you have added buildings, when did those additions occur? I always like to see a sketch of the premises that shows how far apart the buildings are. You may want to show fire hydrants, the distance of your plant from the nearest fire station, and other similar items.
Next would be fire protection. Is your building equipped with a fire sprinkler system? Do you have fire alarms and burglar alarms? What types of systems do you have? Are they tied into an alarm company or to the local police or fire station? Do you have fire extinguishers, a fire brigade and fire hoses? What type of training do you offer your employees? What type of outside inspections and maintenance do you have contracted with fire protection companies?
O’Brien: Please elaborate on boiler and machinery coverage.
Duchscherer: Some businesses have boiler and machinery and some do not. This coverage is for boilers and pressure vessels, electrical equipment, refrigeration equipment, and air conditioning equipment. Some property insurance does include that type of coverage, but this is specific and added coverage for special types of hazards. I always think it is a great idea to have this coverage. It is relatively inexpensive coverage compared to the other lines.
Most carriers have boiler inspectors and consultants on staff who, as part of your premium and policy, will provide legal jurisdictional inspections that are required for air tanks, liquid propane tanks, and high-pressure boilers. If you do not have that coverage, you will need to pay one of the state inspectors to provide the required inspections, and that could cost you several hundred dollars. Sometimes there is no comparison between the loss potential and the premium. The premium is well worth the money spent.
O’Brien: What are your thoughts on general liability coverage?
Duchscherer: I like to have the client divide it into three separate areas in their narrative: premises liability, contractual liability and products liability.
Premises liability refers to the grounds, sidewalks, exits and aisles—life safety code items. Unfortunately, some businesses have failed to work with an architect, engineer or contractor to upgrade their facility conditions to comply with the Americans with Disabilities Act, and they are now facing lawsuits. So I would definitely have a competent person review that.
For contractual liability, no matter if you make something or if you contract out to have your corporate office’s lawn mowed, you should have a list of subcontractors once a year and also require general liability and workers’ compensation insurance certificates. That way, if loss occurs, someone gets hurt or property is damaged, our carriers can subrogate back on their policies.
And then there is products liability. If you make something or assemble a product, you really should have a sample quality assurance or quality control manual available for the insurance loss control person.
O’Brien: What about auto liability?
Duchscherer: You can obtain much of this information from your agent unless you are just starting out. This information will most reflect your written vehicle safety program. If you do not have a program, you should implement one.
You should have a policy statement written by top management, a list of drivers, and a list of vehicles that is categorized by type (commercial or passenger) and indicates whether the vehicles are leased or owned. Motor vehicle record checks should be part of your driver selection process. Work closely with your agent on that because there are some new state laws for employees.
Other key items for a vehicle safety program are inspections and preventative maintenance, ongoing safety meetings and training, and of course, accident investigations and analysis. Remember, you should demand from your agent (through the carrier) your loss runs at least annually, if not semi-annually, and perhaps even quarterly. They are your loss runs—you are paying the premium. Most companies need those documents unless they have a similar investigation tool that tracks your frequency and severity to determine if you have loss issues.
O’Brien: What about workers’ compensation?
Duchscherer: In California, an Injury Illness Prevention Program is required if an employer has at least one or more employees, so typically, the same elements from a fleet safety program should be included such as accountability, responsibility, a policy statement, employee selection criteria, job applications and reference checks, hazard recognition for inspections, training and safety meetings, accident investigations and your loss runs and history. This is usually contained in the First Report of Injury Form (Form 5020 in California), and some companies are required to fill out a supervisor’s or manager’s accident investigation report form. You should also have any safety incentive programs or safety awards available.
O’Brien: Where can listeners find more information on the topics we have covered?
Duchscherer: InterWest has four loss control consultants who are strategically located throughout central and northern California. We also have a webpage that has plenty of good information on workers’ compensation, fleet, and other subjects. As one of our clients, you gain access to this as well as to links and downloadable forms. In addition, we specifically outline some of the specific risk management safety services available for InterWest clients.
O’Brien: Because every business and client will be different.
Duchscherer: That is exactly right. Another source— have your agent or broker contact your existing insurance carrier assuming they have safety and loss control staff.
You may also want to contact Cal-OSHA’s consultation department. They cannot share information with the Cal-OSHA compliance department, which initiates fines and so forth. For no charge, they visit your plant and give you their recommendations. They may review your safety program as well.
You should take advantage of their training and education programs as well as their industrial hygiene services. So if the carrier plans to charge you an arm and leg to test for noise, asbestos or dust, they will provide these services free of charge. And they may develop a working plan to address any hazards or issues that need to be taken care of in a timely manner.
O’Brien: So they will hold you accountable for what they find, but they will not necessarily fine you.
Dirk J. Duchscherer, MS, CSP, ARM, NB is the Risk Control Manager for InterWest Insurance Services, Inc. in Sacramento, California. Duchscherer currently serves as ASSE’s National Professional Development Conference Programs Chair, and he is the Awards and Honors Chair for the Risk Management/Insurance Practice Specialty. He is also an active member of the California Boiler Inspectors Association.