Risk Scenario + Webinar

A Nightmare in Veracruz

A deadly travel accident lands an injured employee in a foreign jail.
By: | January 16, 2013 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Part One

The steel door to the jail cell in the Mexican town of Tuxpan closed with a jarring “clank”.

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On the other side, a police captain walked away, coughing once, before moving out of sight.

For the moment, Ernie Herrerra, a field engineer for a Fresno-based oil exploration company, was alone in that jail cell. He was alone and in acute pain.

He knew, above all else, that he had to stay calm.

He had to think, he had to. But it had all happened so quickly.

He felt like he was in a dream, but it wasn’t a dream. The throbbing in the back of his neck made that all too clear for him.

***

Ernie had just finished a day working with core sampling crews in the Mexican state of Veracruz. There were three crews in action, probing for the kind of crude find that would make his company and its business partner, a major multinational energy conglomerate, very happy.

It had been a long, hot day, driving dirt and gravel roads, visiting the test sites, talking to the drilling teams, gathering data for his report back to headquarters.

He was finished, driving down from the foothills to his hotel room in the town of Tuxpan, when he saw a jeep barreling towards him on the mountain road.

Ernie had almost no time to react before the jeep was on him; four young men, joyriding from the looks of it. Too late, the driver saw Ernie’s SUV.

The other driver overcorrected first one way, then, overcorrected the other way.

With the driver laying on the brakes, the jeep skidded head-on into the front of Ernie’s vehicle. It was going about 35 mph when it hit Ernie.

Even though he saw it coming, Ernie was whipsawed by the impact.

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Lights flashed behind his eyelids as his head was thrown back against his headrest and then tossed forward into the deploying airbag. The force of the backward motion was so severe that Ernie heard something crack and felt a jolt of pain run through his upper neck and the back of his skull.

In intense pain, Ernie wasn’t sure if he should even move.

What he could see inside the jeep was harrowing. One of the passengers in the backseat was convulsing from what looked like a serious head wound. The driver was unable to move, seemingly pinned into his seat by the wrecked steering wheel.

One of the uninjured passengers was trying to tend to his badly injured friend in the back seat. The other uninjured passenger pulled out his cell phone and dialed feverishly.

Panic overwhelmed the scene as it appeared the severely injured young man in the back seat could be in his death throes.

From the snippet of the cell phone conversation that Ernie was able to catch, it sounded like the uninjured passenger was talking to the police and blaming Ernie for the accident.

Part Two

The Tuxpan police chief himself soon arrived, accompanied by an ambulance squad.

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The squad was too late for the poor boy in the back seat of the jeep. He was motionless and not breathing.

As emergency crews worked to safely extricate the driver of the jeep, the uninjured passengers, apart from consoling each other, were on their phones, breaking the horrible news to the relatives of the deceased passenger.

Shocked as he was by the death of the young passenger, and weakened by his own injury, Ernie could never have been prepared for what happened next.

The police chief questioned him, asking if he had been drinking and whether he was speeding when the accident happened.

Next he asked for proof of financial responsibility.

“You mean Mexican auto insurance?” Ernie said.

“Responsibility, proof of financial responsibility!” the chief said to him in Spanish.

Ernie panicked a little, and didn’t grasp what the chief was asking for. He had just grabbed a co-workers’ SUV to get back to his hotel room and had no idea what sort of coverage, if any, had been purchased.

“No,” was all he said, repeating it three times to the insistent chief.

“It’s illegal, your driving here,” the chief said. “You are under arrest.”

The chief took Ernie’s cell phone and practically dragged him from the SUV, even though anyone could tell that Ernie had a serious neck injury.

Ernie felt that if he was moved at all without neck support the consequences could be dire.

Ernie was bilingual, had to be for this assignment. But that did him no good with this police chief.

Ernie told him he felt he was seriously injured and shouldn’t be moved. Ernie had to grind his teeth together to fight the pain when they threw him into the police cruiser and took him to this jail cell at the police station.

***

Now, in the cell, Ernie realized just how vulnerable he was. He had no cell phone, and even if he did, he was totally unprepared for this situation.

He had never been given any information on legal or medical assistance should he be injured or incarcerated in a foreign country.

He wracked his brain. He was young, only 32, and had a pretty good memory. There was nothing about this in the employee handbook that he could remember.

He had been briefed on the risks of foreign travel, but he felt given his health, his innate common sense and his language skills that he’d be okay no matter where he went.

There was no one in the country he could have called besides a drilling engineer, even if he had a cell phone. What had seemed like a manageable situation was now revealed for what it was, a nightmare in the making.

Most of his conversations with supervisors before he boarded the plane in Sacramento focused on communication protocols, cyber security for the highly valuable data he would be sending to headquarters and to the company’s partners in Houston on the potential for big oil finds.

As far as protection for him, any kind of safety net, there was none. His neck hurt, but his brain was going numb with the enormity of it all.

Part Three

Ernie’s accident happened on a Friday afternoon. It took 48 hours for his geology team members to put together that he was missing.

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No one at Ernie’s hotel knew where he was. The team tried local hospitals, fearing he’d fallen ill or been injured. They discovered nothing.

“You think he could have been arrested?” one of the team members said.

“Doubt it,” said another. Ernie was such a straight arrow.

But sure enough, when they went to the Tuxpan police to file a missing persons report, that’s where they found Ernie.

Ernie eventually got a visit from one of his team members, an oil geologist, in jail. The geologist called headquarters and told executives there that Ernie was in custody.

In the meantime, Ernie’s superiors had been able to convince local contacts for their industry partners that Ernie needed to be released from jail immediately on medical grounds.

Four days after the accident, and still with no pain killers in him, Ernie is transported by federal police to Veracruz, where an X-ray reveals that he sustained a fractured cervical vertebrae.

Ernie is on a plane to San Diego, his neck in a brace, and finally medicated, when the recognition of his company’s failure to provide him with adequate insurance, and by extension adequate medical and legal assistance in a foreign land, begins to dawn on him.

“There is no way I should ever have been in that position,” he says to himself as he pops another extra strength pain killer. The more he thinks about it, goaded by the pain he is in, the angrier Ernie gets.

When Ernie lands, he calls his buddy Mike Flaherty, with whom he attended undergrad at the University of Arizona.

Mike is now an attorney specializing in employment law and international business.

“I mean am I missing something here? Did this company leave me exposed unnecessarily?” Ernie asks Mike.

“I’m in a foreign country and I spend four days in jail with a broken neck. Literally, a broken neck,” Ernie says.

“I think they have a liability there,” Mike said. “The local car rental companies in Mexico can only give your company so much in coverage, about $55,000,” he said. “Your company should have known that and made more coverage available to you.”

“With that one passenger dying and the injury to the other, your company could be looking at a serious liability and I’m not even taking into account your pain and suffering,” Mike said.

Mike sees Ernie’s case as an open and shut instance where a company failed to adequately protect an employee traveling in a foreign country.

Ernie is seen by a specialist upon his reentry to the United States in San Diego. The specialist determines that the failure to immobilize Ernie’s neck when he was first injured, and the fact that he endured four days in that state with no relief, have added to the possibility that Ernie will suffer a permanent weakness in his neck.

Ernie was happy to have gotten the job he had. He viewed the oil industry as an exciting place, where a young engineering graduate could travel and make a good living. But the way the company let him down in Veracruz he could not let stand.

“Ernie, can we talk?” the executive who recruited him said in one of several voice mails to Ernie that go unanswered.

Ernie just sat and listened to the voice mails.

“I’m done talking to you,” he said to the phone and to no one.

In addition to the costs of medical treatment and patient transportation within Mexico, Ernie’s company is facing a civil action from Ernie alleging that the company failed to adequately protect him while traveling in a foreign country.

The story of Ernie sitting in a stifling jail cell in a foreign country with a neck injury plays very effectively with a jury. The jury finds that the combination of a permanent injury with the pain and suffering that Ernie endured as a prisoner resulted in significant monetary damages.

His former employer, apart from losing a valuable employee, is now looking at significant premium increases next year, if it can get coverage at all.  The appropriate types and limits of insurance, as well as appropriate training of its employees may have let the oil exploration company and Ernie avoid much of this entire nightmare.

Summary

A failure to secure adequate amounts of in-country coverage and a lack of crisis preparedness adds up to major losses for an oil exploration company that sees a valuable employee injured in a foreign country.

1. Educate beforehand: As our story shows, the failure to educate an employee about the coverage network available to him and the full range of risks he could be exposed to in a foreign land could have dire consequences. Making sure an employee is briefed on how to protect himself during a crisis on foreign soil should be every bit as important as briefing him on the revenue-generating possibilities of the trip.

2. Know the coverage requirements in every jurisdiction: Different nations have different laws in place when it comes to the actions and legal rights of employees that are traveling on business. Our protagonist Ernie Herrerra was jailed because of a provision in Mexican law which requires a driver in an accident to show proof of financial responsibility or face immediate consequences.

3. Establish protocols for international travel crisis management: The time for creating well-understood protocols for managing a crisis on behalf of a traveling employee is before the employee gets on the plane, not after the crisis develops.  An entire crisis management safety net should have been constructed for Ernie Herrerra and wasn’t.

4. Purchase coverage at adequate limits: Is insurance coverage for an employee who travels internationally really the place to cut corners? It is oftentimes our most valuable employees that we trust with traveling to meet with clients or to explore other types of business opportunities. On the one hand, we want to protect these clients. On the other, these talented, top-tier performers, are the ones we can least risk alienating, or in this example, litigating against.

5. Do not lose contact: Perhaps the most frustrating piece of this story for the injured, traveling employee was that he lost contact with his company and his co-workers after his accident. If companies get one thing right in their crisis management plans they should make sure they know how to reach an overseas employee and have options for finding him or her if they drop out of sight.

The Webinar

The issues covered in this scenario were in part based on lessons gleamed from international travel problems. This follow-up webinar focused on specific challenges for global employers and presented actions companies can take to protect themselves and their employees moving forward.

Download a copy of the slide presentation here.

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

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]