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The RecycleGuard Insurance Program, part of Amwins Program Underwriters, has been a dedicated insurance provider to the recycling industry for over 25 years, covering metal, plastic, glass, paper, rubber , textiles, electronics or a mixture of these products.
Approved by the Institute of Scrap Recycling Industries (ISRI) since 2000, RecycleGuard covers over 50% of the scrap industry in the United States. The program’s underwriting team has resolved over 20,000 scrapyard claims and conducted over 4,500 scrapyard risk management visits.
Susan Diecidue, Head of Underwriting for RecycleGuard, and Dan Curran, Senior Vice President and Head of Underwriting for Amwins Program Underwriters, spoke to Insurance Business about the top risks affecting the recycling industry – and how to mitigate them.
Property – Fire
Scrapyards are highly exposed to fire. This is especially true for recycling operations that destroy auto hulks (vehicles that are destroyed, disassembled or inoperative), Diecidue explained, due to the highly flammable automotive shredder residue (ASR) – also called lint – that is created during of the grinding process.
There is also speculation that an increase in lithium-ion batteries (especially those in small electronics, like cell phones) in the waste and recycling stream is causing an increase in the frequency of fires at scrap yards. – but there is a lack of hard evidence to prove this theory, according to Curran.
With the increase in the frequency of fire claims, property insurance has become “the toughest line of business” for the recycling industry, according to Diecidue. She said policyholders need to focus on loss control to get more favorable treatment from underwriters.
“From an underwriting perspective, when we look at scrap yards — especially those with ASR — we want to make sure they have extinguishing systems in the appropriate spaces,” she said. “If they’re recycling paper, we want overhead sprinklers, a good cleaning process, and strong fire watch practices. All of these security controls need to be in place, and when they are, the risks become more acceptable to underwriters.
“If an insured has a fire, what has he done to prevent it from happening again? It’s really important. When we see the frequency of losses on a home insurance policy, we know there is a bigger problem because frequency predicts seriousness. »
Civil Liability – Premises – Operations
Recycling companies often open their scrap yards to vendors, contractors, peddlers and other visitors. While there, these guests are exposed to a “myriad of hazards,” according to Curran, from industrial electric trucks to contractors’ equipment, excavators, moving vehicles, and more.
“We view guest injuries as the primary driver of significant losses on the general liability side,” Curran said. “The layout of the scrap yard is critically important, and making sure there is a place where peddlers can drop off and process their scrap, which is separate from other parts of the yard where there are a lot of potential hazards. We are also looking for fencing, signage and PPE for everyone at the scene.
Commercial Auto – Trucking Risks
Most recycling operations have fleets of commercial vehicles, which are a difficult class of risk to insure. In recent years, the commercial transportation industry has faced challenges related to distracted driving, a general increase in automobile claims costs due to new technologies, and an increase in catastrophic liability claims due to inflation. society and the verdicts of nuclear juries.
Recycling companies are not immune to these trends. Curran commented, “Many recycling companies use dump trailers, which carry a looser load (with less stability) than a full truck (FTL). But it’s a typical heavy truck show.
“The challenge is that many operations have fleets in tough legal places and tough claims jurisdictions because the scrapyards are where the people are. They are close to metropolitan areas, then [the scrap material] is moved to more industrial areas. This means that the trucks travel through high traffic areas and are just as susceptible to major commercial automobile losses as any other type of heavy truck operation.
Shortage of drivers/workers – Why transfer of contractual risks is essential
The recycling industry, like other commercial automobile operators, also faces a driver shortage, which many companies are countering by hiring contractors to drive for them. In doing so, Diecidue said policyholders should ensure they have appropriate contractual risk transfer wording in their fully executed contract between themselves and the contracting party to transfer exposures and avoid material losses.
“If the [subcontracted driver] does not have adequate insurance or no insurance in place, we [as the insurer of the primary insured] are going to be named in a claim or a lawsuit if something happens – and when trucks are involved, claims can get very nasty,” Diecidue told Insurance Business. “The contract should require the subcontractor to carry limits equal to or greater than our insured, and they should designate our insured as an additional insured (AI). We also look for disclaimer agreements, so the liability rests with the subcontracted trucker. »
If policyholders do not meet these risk transfer criteria, insurers may exclude coverage for certain drivers or attach no-drive letters to policies, depending on the state. The same practices apply when recycling companies hire temporary workers on site. If subcontracted workers do not have contractual risk transfer in place, insurers can exclude the exposure under the general liability policy.
“Agents and brokers must defend [contractual] risk transfer because it protects their customers,” Diecidue pointed out. “My best advice is that they work with a lawyer and the insured to set up a proper risk transfer so they don’t end up [facing a huge claim or in a situation where coverage is denied]. It also makes it easier for them to get insurance, because if an underwriter sees that an insured is proactive in risk transfer and safety conscious, it’s a win-win.
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