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Food Safety Modernization Act: Navigate New Exposures with Best Practices

For motor carriers, a key to protecting themselves against all types of claims is having broad insurance coverage.
By: | September 12, 2017 • 6 min read

Many things can go wrong during the transportation of food.

Lax sanitation and temperature control can lead to outbreaks of foodborne illness with harmful effects on consumers. Poor security can result in contamination or thefts of entire shipments. Ambiguous contract language could result in finger pointing among food suppliers, shippers, carriers, distributors and their insurers.

The transportation of human and animal food is subject to strict federal regulation.  The FDA Food Safety Modernization Act (FSMA) rule on Sanitary Transportation of Human and Animal Food seeks to strengthen safety standards even further by mandating record-keeping requirements for each party in the food transportation chain.

It does not, however, introduce unfamiliar protocols or change how damage or adulteration is determined.

Defining what qualifies as damage/adulteration remains defined by the Food, Drug and Cosmetics Act of 2005. Also, the Carmack Amendment remains the legislative authority on motor carriers’ legal liability. While the FSMA rule reinforces existing best practices, it doesn’t increase exposure or impact the liability landscape within the food supply chain.

“It was not the FDA’s intent to change how the cargo insurance claims process is handled,” said Ray Lampley, Associate Manager, Inland Marine Claims, Travelers. “It continues to show itself to be more of a perceived risk than a real risk from an insurance and claims perspective.”

“Many motor carriers are already meeting the performance-based standards put forth by the FSMA,” said Adam Sellars, Inland Marine Risk Control Specialist, Travelers. “The challenge will lie in formalizing their documentation procedures.”

To fulfill their record-keeping requirements in the areas of training, sanitation, and temperature control — and help protect themselves from any new exposure or potential claim situation — motor carriers should consider these best practices:

1. Training

Driver training is required at time of hire, but it needs to expand beyond the basics of operating a tractor trailer. Drivers must be made aware of their responsibilities in ensuring the safety of their shipment from start to finish. And per the FSMA, there must be documentation of that training.

“Drivers will have their traditional orientation that relates to collision avoidance and defensive driving. But they also need training that is specific to safe food handling and sanitary transportation,” Sellars said.

That begins before the cargo is even loaded. Drivers should first ensure their trailer is clean and maintained at the proper temperature when hauling refrigerated/frozen foods. A carrier should develop and implement written procedures that specify practices for cleaning, sanitizing if necessary, inspecting vehicles and transportation equipment, and specifying how they will monitor and record in-transit temperatures.

2. Sanitation

Maintaining clean trailers is paramount to the prevention of cross-contamination. Records should specify practices for cleaning, sanitizing if necessary, and inspecting vehicles and transportation equipment. That may be the responsibility of the shipper or the carrier, depending on what their contract stipulates.

“The FSMA doesn’t provide any specific recommendation around how or when the trailer should be cleaned. They leave that up to the transportation parties and shippers to decide. The key element is ensuring that records are maintained that demonstrate appropriate cleaning and sanitation practices were implemented,” Sellars said.

“If the shipper cleaned the trailer before loading, the shipper should document that. The carrier should obtain copies of that record or validate it themselves.”

3. Temperature Monitoring

Temperature control is one of the most important aspect of preventing the growth of bacteria that can lead to illness. The old-fashioned way to monitor temperature is for the driver to pull over periodically and check the trailer temperature manually, recording the numbers on a paper log. But that method can be far from perfect.

When using this method, it may be too late to save the cargo from spoilage by the time the driver discovers an inadequate reading and arranges for a maintenance provider or backup truck to get to the location.

“The rule doesn’t require carriers to have a system in place for real-time monitoring, but many leading carriers are using that technology. Some of the more sophisticated shippers will use telemetry to monitor temperatures in transit,” Sellars said. “That way a sensor can send an alert to the driver or a main office as soon as the temperature approaches an unsafe level, and action can be taken immediately to reroute that truck or otherwise fix the issue.”

Pre-cooling a trailer before cold foods are loaded is also an important step.

“You want to make sure that the trailer itself along with the air within it is at certain temperature before loading.  If you’re loading cold products into a warm trailer, you can change the dynamics very quickly as the refrigeration system may not be able to maintain appropriate temperatures,” Sellars said. “That can vary depending on the type of trailer, the insulation characteristics of that trailer, and the temperatures that are needed during transit.”

An acceptable temperature range for loading should be specified in writing, and verified by the driver before setting off.

4. Security

“While the FSMA rule does not identify cargo security requirements, the controls that a carrier has in place around this will factor into their overall risk mitigation strategy. Theft of cargo and damage from pilferage is one of the more frequent and severe types of claims that we see,” Sellars said. Cargo theft is bad enough, but carriers can incur huge losses even if nothing is stolen.

“If the seal on the trailer door is broken or cargo is otherwise accessed by those seeking to steal, there may be concerns of contamination.  You can’t be sure in some cases who or what got inside and whether the food has been damaged/adulterated in any way,” Sellars said.

To prevent that scenario, Travelers promotes the use of specialized housings and locks around seals and doors which can prevent unauthorized access.

The Importance of Broad Coverage and Expertise

For motor carriers, a key to protecting themselves against all types of claims is having broad insurance coverage.

“Some insurers may stick to a very black and white interpretation of adulteration. They may require additional testing to find the exact contaminant. Without that testing, they can deny coverage due to lack of proof,” Lampley said. Those insurers may now be scrambling to update their policy forms or draft new products to account for gaps in existing coverage forms.

“At Travelers, our legal liability coverage form is already broad enough to provide coverage for the exposures carriers face. Anything that could be deemed unsanitary under the definitions of the FSMA or the Food, Drug and Cosmetics Act could be covered by us,” he said. That could, for example, include a situation where a receiver rejects a shipment because of evidence that the goods were either held or transported under unsanitary conditions.

“Even if there is no visible proof that the food is contaminated, it still could meet the FDA’s definition of damage/adulteration, so we may consider that damaged goods and cover that loss,” Lampley said.

“We have studied this new regulation for the past three years, and our expertise around the law means we can sort through its implications very quickly, and we’ve determined we don’t have to update our coverage. Our expertise means that no matter what new regulations come along, Travelers is ahead of the game.”

To learn more, visit https://www.travelers.com/business-insurance.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Travelers. The editorial staff of Risk & Insurance had no role in its preparation.




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The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and generated revenues of approximately $28 billion in 2016. For more information, visit www.travelers.com.

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]