Your Loss Control Plan (Part 1)

rollover

A successful dairy farmer buys a tractor-trailer for his son-in-law to haul steel. Nothing unusual about that. Then the son-in-law breaks his arm. He can’t drive, but knows a friend who can. On the friend’s first trip he brakes hard, loses a steel coil and the coil takes the cab off of the truck. No one is hurt, but the trucking venture closes.

A potato farmer buys a tractor-trailer to make deliveries to a major city about 250 miles away. His son will drive the truck and is advised to get some experience. “What for?” he responds. “Any idiot can drive a truck.” On his first trip, in an exit ramp, the newly-minted driver rolls the fully loaded truck on its side. The truck is damaged and later sold after it was repaired. Fortunately, no one was hurt.

An 18 year old tractor-trailer driver takes a friend with him. Seven miles from the origin of the trip, he shows off how fast he can take an S curve around the “devil’s punchbowl,” a naturally occurring sinkhole. He rolls the truck in the curve and his friend is fatally injured.

Inherent Risk

All of the above disasters happened to people I know. All of these stories are examples of the inherent risk in trucking operations.

Inherent risk — the probability of loss arising out of circumstances or existing in an environment, in the absence of any action to control or modify the circumstances. businessdictionary.com

Every business has its share of risk. Without risk there is no reward. Most businesses share their risk with a risk partner — their insurance company. They have no choice. It’s the law.

The agreement to share risk is commonly known as an insurance policy. It is a contract. Its purpose is to protect the assets of the insured.

Being a contract, both parties to the contract have certain duties and obligations. One of the presumptions of any contract is that the parties act in good faith — that is honestly and fairly, so both can receive the benefits of the agreement.

Another presumption (at least on part of the insurance company) is that risks are controlled — reasonable efforts are made to prevent losses and/or harm to others. The contract language may call for commercially reasonable efforts, reasonable best efforts,  every effort, or even commercially reasonable and diligent efforts in this area.

What does this mean?

The standard of care would be reasonable diligence (due diligence).

— It means the care and attention that is expected from and is ordinarily exercised by a reasonable and prudent person under the circumstances.

It’s no coincidence that one legal definition of reasonable diligence arose from lawsuits involving transportation . . .

“A fair, proper, and due degree of care and activity, measured with reference to the particular circumstances; such diligence, care, or attention as might be expected from a man of ordinary prudence and activity.”

Due diligence in the prevention of losses (loss control) can mean to your business, depending on the level of risks involved, having a loss control plan.

To be continued . . .

Thank you for reading Part 1.

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