Sponsored: Engle Martin & Associates

Manage Heavy Equipment Fire Risk to Reduce Costly Claims

Not investing in a good fire suppression system exposes equipment owners to numerous fire hazards, which can wipe out valuable heavy equipment.
By: | May 15, 2018 • 6 min read

Fighting something as swift and unpredictable as fire may seem like a losing battle, and indeed, fire is the second leading cause of loss for industries reliant on heavy equipment like mining, construction, marine cargo, logging and agriculture.

Heavy machinery relies on diesel fuel and/or hydraulic oil – liquids highly flammable under pressure — and in some cases process combustible material like wood chips, corn husks or other dried plant material. Together, they create a recipe for fast-moving flames.

To make matters worse, these machines tend to operate in areas not easily accessible by fire departments.

“Logging and agricultural equipment provide good examples of machinery operating in remote areas. There may not be any real roads leading to where the machine is, which impacts response time for the fire department,” said Blair Bennett, Senior Executive General Adjuster with Engle Martin & Associates, a national independent loss adjusting and claims management firm. “I’ve seen countless claims where the equipment is totally burnt to the ground by the time the fire department is able to get there.”

Tractors, excavators, boring machines and the like are expensive tools to replace. Heavy machinery typically comes equipped with hand-held extinguishers, but in most cases it’s too little too late. By the time an operator discovers there’s a problem, the small extinguisher is likely no match for a growing fire fed by the machine’s heat.

“There are specific types of fire, and each calls for a specific type of suppression,” Bennett said. The ability to distinguish classes of fire and deploy the proper solution can be the difference between a total loss and a minor repair.

Type of Fire Determines the Suppressant Needed

Blair Bennett, Senior Executive General Adjuster

The National Fire Protective Association categorizes fires as Class A, Class B or Class C, depending on what caused the combustion and what feeds the flame.

Class A fires are usually started from an accumulation of debris like insulation, upholstery or paper waste in tight areas of the equipment. If the material gets too close to a heat source, it can quickly ignite.

“This type of fire is very susceptible to heavy equipment working in the logging, agricultural and waste management industries,” Bennett said.

Class B fires involve diesel fuel, gas, grease or hydraulic oil. Hydraulic oil and diesel fuel on their own may not be very flammable, but can ignite easily under pressure and in the presence of another accelerant like gas. “These are what we call accelerator-driven fires,” Bennett said. “Hydraulic oils can operate between two and 10,000 pounds per square inch. A lot of these machines use as many metal lines as possible for high pressure hydraulic systems. Due to the nature of machines, their movements and how they work, there are still many areas of pressure that need to be considered,” he said.

Class C fires are electrical fires. Heavy equipment is heavily wired, and those wires are subject to some rough environments with vibrations, extreme temperatures and debris. Wiring can easily come loose, and just a small amount of friction against a metal component can send sparks flying.

The class of fire dictates what type of suppressant will be most effective. The two most common systems are single and dual fire suppression.

A single system uses only one type of suppression agent that may be a powder or a liquid. They tend to be cheaper to produce and install and are suitable for Class A fires without an accelerant.

A dual system utilizes tanks that suppress with both liquid and dry chemical agents, which is useful for Class B fires. The dry suppressant will extinguish the flames, while the liquid component cools down the heat source.

“If you don’t address the heat source, the fire will re-flash and return. In order to attack the fire from both angles, you need to put the fire out from the hydraulic fuel and also be able to cool down the components that can reignite, such as the heater, muffler or any moving parts that have generated frictional heat,” Bennett said.

Class C, or electrical fires, require a special type of pattern extinguisher that can illuminate the fire and spray suppression materials more strategically to avoid causing more damage or shorting.

“One thing to keep in mind is that both Class A combustion and Class C combustion can also turn into a Class B combustion if the flames travel to a hydraulic or fuel line,” Bennet said. “Therefore, a sophisticated suppression system is the best way to extinguish a fire quickly.”

Weighing the Cost and Benefits of Suppression Systems

Despite the effectiveness of fire suppression solutions, cost remains a barrier. Suppression systems generally do not come factory-installed, and operators wishing to implement such a system must have one custom-built for each particular machine.

“Each system has to be custom-designed based on the location of the heat source. It would entail detectors in various areas, multiple lengths of tubing and different locations for nozzles,” Bennett said. “I think in the future we will see more companies either having their own proprietary system or offering factory installation of the equipment.”

The systems can range from a few thousand dollars to well over $10,000 depending on how many tubes and nozzles are needed and the size of the tanks containing the fire suppressants. Vehicle owners and operators must decide whether that investment is worthwhile.

“If a company has a wheel loader valued at $50,000, it might not make sense to put $10,000 worth of improvements on it,” Bennett said. “But from an underwriting standpoint, fire suppression systems would be a way to reduce risk and lower premiums.”

Rely on Industry Expertise

Luckily, there are other simpler and less expensive ways to mitigate fire risk.

“A lot of heavy equipment fires can be eliminated with daily maintenance and cleaning. A responsible company will inspect each machine every day to ensure they are clear of combustible debris and that there are no leaking fuel lines or frayed wires,” Bennett said.

A skilled adjuster can help operators identify possible fire hazards not always obvious at first glance. A hole may not be visible, but often a gray or discolored hose indicates something is off. Belly pans that protect the engine and transmission should be kept clear — even a small buildup of waste can serve as kindling. For companies that do choose to install a fire suppression system, bi-annual inspections are necessary to keep them in top order.

“Operator education is also critical,” Bennett said. “In addition to proper inspections, operators should be trained in how to respond to a fire. Knowing what steps to take to protect yourself and the machine can minimize the damage.”

With experience in both marine and commercial property insurance, Engle Martin’s Specialty Marine & Transportation group can identify areas where an equipment owner is most exposed, either due to coverage gaps created by exclusions, or due to poor loss histories that limit their coverage options.

“We can handle anything from full adjustments involving complex claims to basic appraisals,” Bennett said.

To learn more, visit https://www.englemartin.com/loss-adjusting/inland-marine/.



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

Atlanta-based Engle Martin & Associates is a leading national independent loss adjusting and claims management provider. Privately held and owner operated, the firm delivers a comprehensive line of property and casualty claims service offerings.

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.


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.


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?


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.


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.


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]