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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

Risk Report: Manufacturing

More Robots Enter Into Manufacturing Industry

With more jobs utilizing technology advancements, manufacturing turns to cobots to help ease talent gaps.
By: | May 1, 2018 • 6 min read

The U.S. manufacturing industry is at a crossroads.

Faced with a shortfall of as many as two million workers between now and 2025, the sector needs to either reinvent itself by making it a more attractive career choice for college and high school graduates or face extinction. It also needs to shed its image as a dull, unfashionable place to work, where employees are stuck in dead-end repetitive jobs.

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Added to that are the multiple risks caused by the increasing use of automation, sensors and collaborative robots (cobots) in the manufacturing process, including product defects and worker injuries. That’s not to mention the increased exposure to cyber attacks as manufacturers and their facilities become more globally interconnected through the use of smart technology.

If the industry wishes to continue to move forward at its current rapid pace, then manufacturers need to work with schools, governments and the community to provide educational outreach and apprenticeship programs. They must change the perception of the industry and attract new talent. They also need to understand and to mitigate the risks presented by the increased use of technology in the manufacturing process.

“Loss of knowledge due to movement of experienced workers, negative perception of the manufacturing industry and shortages of STEM (science, technology, engineering and math) and skilled production workers are driving the talent gap,” said Ben Dollar, principal, Deloitte Consulting.

“The risks associated with this are broad and span the entire value chain — [including]  limitations to innovation, product development, meeting production goals, developing suppliers, meeting customer demand and quality.”

The Talent Gap

Manufacturing companies are rapidly expanding. With too few skilled workers coming in to fill newly created positions, the talent gap is widening. That has been exacerbated by the gradual drain of knowledge and expertise as baby boomers retire and a decline in technical education programs in public high schools.

Ben Dollar, principal, Deloitte Consulting

“Most of the millennials want to work for an Amazon, Google or Yahoo, because they seem like fun places to work and there’s a real sense of community involvement,” said Dan Holden, manager of corporate risk and insurance, Daimler Trucks North America. “In contrast, the manufacturing industry represents the ‘old school’ where your father and grandfather used to work.

“But nothing could be further from the truth: We offer almost limitless opportunities in engineering and IT, working in fields such as electric cars and autonomous driving.”

To dispel this myth, Holden said Daimler’s Educational Outreach Program assists qualified organizations that support public high school educational programs in STEM, CTE (career technical education) and skilled trades’ career development.

It also runs weeklong technology schools in its manufacturing facilities to encourage students to consider manufacturing as a vocation, he said.

“It’s all essentially a way of introducing ourselves to the younger generation and to present them with an alternative and rewarding career choice,” he said. “It also gives us the opportunity to get across the message that just because we make heavy duty equipment doesn’t mean we can’t be a fun and educational place to work.”

Rise of the Cobot

Automation undoubtedly helps manufacturers increase output and improve efficiency by streamlining production lines. But it’s fraught with its own set of risks, including technical failure, a compromised manufacturing process or worse — shutting down entire assembly lines.

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More technologically advanced machines also require more skilled workers to operate and maintain them. Their absence can in turn hinder the development of new manufacturing products and processes.

Christina Villena, vice president of risk solutions, The Hanover Insurance Group, said the main risk of using cobots is bodily injury to their human coworkers. These cobots are robots that share a physical workspace and interact with humans. To overcome the problem of potential injury, Villena said, cobots are placed in safety cages or use force-limited technology to prevent hazardous contact.

“With advancements in technology, such as the Cloud, there are going to be a host of cyber and other risks associated with them.” — David Carlson, U.S. manufacturing and automobile practice leader, Marsh

“Technology must be in place to prevent cobots from exerting excessive force against a human or exposing them to hazardous tools or chemicals,” she said. “Traditional robots operate within a safety cage to prevent dangerous contact. Failure or absence of these guards has led to injuries and even fatalities.”

The increasing use of interconnected devices and the Cloud to control and collect data from industrial control systems can also leave manufacturers exposed to hacking, said David Carlson, Marsh’s U.S. manufacturing and automobile practice leader. Given the relatively new nature of cyber as a risk, however, he said coverage is still a gray area that must be assessed further.

“With advancements in technology, such as the Cloud, there are going to be a host of cyber and other risks associated with them,” he said. “Therefore, companies need to think beyond the traditional risks, such as workers’ compensation and product liability.”

Another threat, said Bill Spiers, vice president, risk control consulting practice leader, Lockton Companies, is any malfunction of the software used to operate cobots. Then there is the machine not being able to cope with the increased workload when production is ramped up, he said.

“If your software goes wrong, it can stop the machine working or indeed the whole manufacturing process,” he said. “[Or] you might have a worker who is paid by how much they can produce in an hour who decides to turn up the dial, causing the machine to go into overdrive and malfunction.”

Potential Solutions

Spiers said risk managers need to produce a heatmap of their potential exposures in the workplace attached to the use of cobots in the manufacturing process, including safety and business interruption. This can also extend to cyber liability, he said.

“You need to understand the risk, if it’s controllable and, indeed, if it’s insurable,” he said. “By carrying out a full risk assessment, you can determine all of the relevant issues and prioritize them accordingly.”

By using collective learning to understand these issues, Joseph Mayo, president, JW Mayo Consulting, said companies can improve their safety and manufacturing processes.

“Companies need to work collaboratively as an industry to understand this new technology and the problems associated with it.” — Joseph Mayo, president, JW Mayo Consulting

“Companies need to work collaboratively as an industry to understand this new technology and the problems associated with it,” Mayo said. “They can also use detective controls to anticipate these issues and react accordingly by ensuring they have the appropriate controls and coverage in place to deal with them.”

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Manufacturing risks today extend beyond traditional coverage, like workers’ compensation, property, equipment breakdown, automobile, general liability and business interruption, to new risks, such as cyber liability.

It’s key to use a specialized broker and carrier with extensive knowledge and experience of the industry’s unique risks.

Stacie Graham, senior vice president and general manager, Liberty Mutual’s national insurance central division, said there are five key steps companies need to take to protect themselves and their employees against these risks. They include teaching them how to use the equipment properly, maintaining the same high quality of product and having a back-up location, as well as having the right contractual insurance policy language in place and plugging any potential coverage gaps.

“Risk managers need to work closely with their broker and carrier to make sure that they have the right contractual controls in place,” she said. “Secondly, they need to carry out on-site visits to make sure that they have the right safety practices and to identify the potential claims that they need to mitigate against.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]