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Coverage Spotlight: School Bus Contractor

How to Manage the Unique Risks of School Bus Drivers

Transporting young children is risky business. In this Q&A, an underwriting VP discusses solutions to minimize the exposures.
By: | May 10, 2018 • 6 min read

Imagine navigating all the normal risks of driving — congested traffic, aggressive drivers, distracted drivers — while also taking responsibility for the safety of a couple-dozen elementary schoolchildren in your backseat. School bus drivers and contractors take on significant liability risk each time they hit the road, as well as some other unique exposures not faced by a typical commercial auto fleet.

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Mark Plousis, Vice President, Commercial Underwriting, Philadelphia Insurance Companies, describes some of the challenges faced by school bus contractors, and the solutions available to mitigate the risk.

R&I: What are the top areas of exposure for school bus contractors?

Mark Plousis: An estimated 26 million kids take a bus every day, and all the activities associated with children entering and exiting a bus and being transported create exposure, especially when the children are very young and maybe not as aware of their surroundings.

Last year, there were 22 child fatalities associated with activities around a school bus. It usually results from someone not adhering to the signals on the bus, driving around it while it’s stopped, and hitting a child going to or from the bus. In some cases, it results from the school bus actually hitting a child or from activities taking place on the bus.

Mark Plousis, Vice President, Commercial Underwriting, Philadelphia Insurance Companies

There are various abuse issues that are associated with the school bus contractors, whether that’s aggressiveness or sexual abuse from a driver to a passenger, or passenger on passenger abuse. Incidents like these are very rare, but anything involving a child immediately becomes significant.

Automobile physical damage and liability risk is another big area of exposure, especially weather-related catastrophes

R&I: What are the top drivers of auto liability risk?

MP: As with all of the commercial auto industry, distracted drivers are a big problem. A school bus driver is distracted enough with the activities of multiple children entering and exiting the bus, or horsing around on the bus and making noise. The driver is also expected to look out for bad behavior like bullying. And today that’s compounded by the prevalence of handheld devices. Some drivers are checking their phones and texting while driving. We need school bus drivers to be totally alert and totally aware.

PHLY’s Vice President of Commercial Auto Underwriting, Mark Plousis, explains the built-in safety standards for the School Bus industry.

R&I: Many commercial auto fleets use telematics to track driver behavior. Are school buses equipped with telematics?

MP: School buses have been active in the telematics business for a long time, beginning with simply installing cameras on board. Today, the cost of telematics systems is dropping as the technology gets cheaper and easier to produce, so more of our contractors have implemented fleet telematics. It does help manage the driver, because the driver knows he or she is being watched, and it may also help manage the children for the same reason.

In addition to conditioning behavior of the driver and the passenger, telematics systems also memorialize the data, including speed, hard braking, sharp turning, etc. So over time, we start to see drivers not using their phones while they’re operating the bus, and being cognizant of their speed, how they make turns, and how hard they hit the brakes. School bus contractors can manage their risks much more effectively with the help of telematics.

R&I: Do schools set certain standards that bus contractors must adhere to around the maintenance of the vehicles or qualifications of drivers?

MP: The federal government actually sets a lot of standards for the “traditional” yellow school bus. The National Highway Traffic Safety Association dictates how the buses are built, maintained and operated, and has established safety standards on the drivers.

As with all of the commercial auto industry, distracted drivers are a big problem.

Many states have additional driver requirements on top of that, such as a criminal background and sexual offender background check. Each state may have different standards around bus specs — everything from its structure to how high the seats are and how the swing arm is attached. And each state reviews the buses of each contractor to make sure that they comply, so there is a lot of built-in risk management by the states.

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It’s imperative that contractors follow these guidelines and do everything in their power to ensure their vehicles are safe and their drivers are qualified, otherwise they risk losing their contracts with a school district and may end up out of business.

R&I: What risk mitigation recommendations would you make to school bus contractors?

MP: The top items are driver screening and driver training.

Many contractors that we work with already do extensive training, both onsite at their facilities and on the road, having drivers practice their routes and familiarize themselves with their stops. They’ve taken a very hands-on approach.

Insurance coverage is secondary to proactive risk management.

As part of our School Bus Contactor Program, we also offer several risk management services, including an online driver safety training program that focuses on distracted driving.

Screening driver history can be more difficult, but we are addressing that with DMV monitoring. We put all of our contractors’ drivers into one of our vendor’s databases and monitor their driving activity 24/7. If a school bus driver has a speeding incident or a DUI incident on a Friday or Saturday night, we’ll know about it right away, and we’ll let our insureds know about it. Addressing those issues immediately is the best way to keep unsafe drivers off the road, which goes a long way in reducing all kinds of risk. Insurance coverage is secondary to proactive risk management.

R&I: What other services are included in Philadelphia Insurance’s school bus contractor program?

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MP: We have a team of risk management consultants that will work with insureds on a number of issues. They’ll review each account’s loss history, identifying patterns to see where they can help reverse a negative trend. They’ll review safety manuals and help to create a better one if needed. They’ll do field inspections of their yard and each individual bus to make sure everything’s safe. They’ll also provide one-on-one driver training. It’s a hands-on approach.

R&I: What coverages does the program provide?

MP: The key benefits of the program are auto liability and auto physical damage. We also have an auto enhancement form that gives some good physical damage coverages to the operators, including a zero deductible for repair of glass, and coverage for towing, lease gap, electronic equipment and other physical damage causing loss of use. Property/casualty commercial general liability, as well as abuse and molestation coverage are also available.

In the event of a significant accident, we do have crisis management coverages that can be utilized immediately, which includes image restoration. With social media and the ability for word to spread so quickly, it’s important to make sure companies respond to an incident quickly, but correctly, and also to ensure no one is defaming their character unfairly. We have a team of contractors with the company that can work with our insured to make sure that their reputation is maintained and taken care of. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

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Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

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Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

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“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]