For Tri-Marine International, a global tuna-fishing company, the price of protection-and-indemnity insurance — a kind of seagoing workers’ compensation coverage — has been rising relentlessly the last few years.
In its upcoming insurance renewal in Feb. 2014, Tri-Marine is looking at a 5 percent rate hike, which would amount to a two-year increase of as much as 15 percent, according to Gordon Adams, the ship owner’s chief risk officer.
That pretty well tracks the current experience of companies with operations on land, who are seeing their premiums for workers’ compensation and other casualty coverage climb this year. In extreme cases, the rise is as much as 25 percent, according to chief risk officers and insurance brokers.
Driven by surging employee claims for workplace injury and illness, and lawsuits asserting bodily injury by third parties, soaring rates for the casualty side of property-and-casualty insurance are prompting CFOs and risk managers to cut off the source of the rise in costs: home and workplace accidents.
Lacking faith that they can hold down premium increases by curbing court claims, many employers are putting their money into training workers in proper safety measures and rigging workplaces with up-to-the-minute safety engineering and machinery.
Wards of the Court
Under the land-locked U.S.-based workers’ comp system, workers give up the right to sue their employers in exchange for medical coverage and wage-loss compensation. No such agreement exists at sea, however, where injured crew members of ships owned by companies like Tri-Marine can sue their employers freely for injuries or sickness suffered on board.
The abundance of such lawsuits have been driving up P&I premiums, according to Adams, a graduate of the U.S. Merchant Marine Academy.
Lawsuits under the 1920 Jones Act, which protects merchant sailors, have developed into “a known area of predatory counsel in litigation,” the risk manager says. “There are plaintiffs’ lawyers that specialize in Jones Act litigation, some going so far as to specialize in bringing tuna-boat lawsuits,” he says.
Under the Jones Act, “seamen are made wards of the court, and the courts are charged with protecting them as if they are children,” he says. “And the standard under that is featherweight.”
Placing an emphasis on trying to win such court cases would only drive up Tri-Marine’s risk costs. Adams deduces that “the best way to control [the risk] is, obviously, don’t have accidents.” Having decided to put its money into controlling losses on board its vessels, Tri-Marine has been ramping up its spending on safety, he says.
“I know it sounds trite, but the more training you give [crews], the better you engineer your vessels, the more you run drills and safety training, the less accidents you’re going to have,” he says, noting that the company has been hiring loss-control experts, issuing new safety manuals, and holding regular on-board training sessions and meetings between captains and safety engineers.