That’s paramount to Pianko at Indiana Lumbermens. When considering a potential client, he looks closely at management attitude, making sure they know what’s going on in the yard on a daily basis and that company safety policies are followed consistently. Just having the required OSHA safety manual isn’t enough.
Insurers also want to see a financially sound company “so we’re confident they’re not having to cut corners,” Warren says, adding that the organization needs to deliver good workmanship and a good track record of past loss experience. And for workers’ compensation, companies should have formal return-to-work programs that safely reinstate workers at their jobs as quickly as possible after work-related injuries.
Eiffert says he works hard to make Boone County Lumber a desirable insurance customer, not just because it will save him money and protect his business, but because “the people who work here aren’t just my employees, they’re my friends,” he says. “If one of my people gets injured, we’re going to do our own little investigation. We’ll find out what about the environment or decision process compromised his safety. It’s way more than lip service in our environment. We’re serious.”
Pianko and other insurance professionals also say they look carefully at employee retention. High turnover means a less experienced, less well-trained workforce. Corporate safety director Gregg Speed has seen that at Hancock Lumber, a 12-location pro dealer based in Casco, Maine. His company’s internal analysis revealed that 30 percent of its injuries involved workers with a year or less on the job. “It’s a lack of experience, trying to be a hero, trying to do it themselves, or not being trained well,” says Speed, another member of NLBMDA’s Risk Management Committee. “We try to have a mentor system and put them with a veteran to teach them and show them how to improve.”
That kind of environment is the best way to control losses, Raven says. “Unless you have a culture that starts at the top and goes all the way through the company, you won’t do a thing to reduce your costs,” he says. “People will leave safety equipment lying around and won’t document injuries until it’s a fabric of your business. It’s a critical issue.”
And it’s not rocket science, Speed says. Hancock Lumber is an operation with 700 employees working in retail and discount stores, a millwork shop, two sawmills, a panelization operation, an installed insulation operation, a drafting service, and kitchen and window showrooms. In total, the company had only two lost-time injuries in 2003. Hancock measures both frequency of injuries (with OSHA incidence rates) and their severity (with loss ratios): The company’s incidence rate is a four, about half the industry average, while the corporate loss ratio is about 7.5 percent. Sixty percent is considered an acceptable risk to insurers, Speed says. “It comes down from top-level management who buy into it, believe in it, and give you resources to get the job done,” he says. “Second, we found that you have to be very focused on accident prevention and treat a near-miss very seriously.”
Like many dealers, Hancock also pays for safety. Safety performance measurements account for up to 25 percent of discretionary bonuses for its 19 safety directors. Plus, safety bonuses are paid to employees company-wide because it’s recognized that safety directly impacts the company’s bottom line. “I consider myself an entrepreneur within the company,” says Speed, “Safety and loss control is a profit center. You can have huge swings in costs [related to] safety and loss. When you can start proving that this is the deal, you wonder why everyone isn’t doing this.”
Under Contract Today, every dealer also should be reviewing supplier contracts from builder customers and examining the dealer’s insurance coverage. Many contracts now ask dealers to take on increasing amounts of liability for possible errors the builder might make through additional insured requirements and broad form indemnification. “It’s increasing exponentially with [local builder] acquisitions by national builders,” says Ken Kuester, president of Lumber Unlimited, a 150-employee dealer with locations in Jacksonville and Fernandina Beach, Fla., and Ellijay, Ga. “Most are pretty adamant if you don’t provide it, they won’t do business with you. Our insurance provider balks and squeals, but they end up doing it. It will end up raising our insurance costs.”
More and more limits are being put on contractual liability coverage, says Bailey, the Baylor University insurance instructor. Hence, at the time of renewal, dealers should check to make sure that coverage hasn’t been dropped. Moreover, a quirk has arisen in the area of additional insured coverage that could also be problematic, Bailey says. In the past, most policies covered the dealer both while employees were on the job performing an operation, such as installing a window, and for completed operations claims that could crop up months later under a single endorsement. Now, it’s either two separate endorsements with an extra charge for completed operations, or the insurer simply won’t offer completed operations coverage.
Dealers should have both endorsements, Bailey says. When a dealer signs a contract that requires them to provide additional insured status for work and completed operations, “they need to make sure their policies have the right endorsements to do that.”
