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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.

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 and 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]