As we've discussed in the past, it seems to be a natural condition of risk professionals that we tend to focus on the risk of the day—the one that has most recently raised its ugly head to bite someone else. The past few years it was natural catastrophes and the need for business continuity planning, before that it was terrorism. In the aftermath of the high profile product recalls of the past 12 months, it is now supply chain risks.

This was certainly evident at the annual RIMS conference in San Diego in May. The need to carefully identify and manage the risks associated with an organization's supply chain was the subject of several workshops and probably thousands of private conversations. Of course, these risks can present liability exposures, product recall exposures, business interruption exposures, and, most importantly, brand equity exposures.

As our economy becomes more global these risks become more difficult to identify and treat. It would be very easy, for example, to overlook the fact that a critical component of a part your company buys from a supplier to incorporate into your product is manufactured in a foreign land, perhaps in a plant that pays too little attention to consistent quality standards.

The fact that an organization is not a manufacturer does not eliminate supply chain risks, either. Of course, all retailers have these risks. But many service businesses do as well. For example, how could a dry cleaner operate without access to the cleansers it needs? What would happen to a newspaper if it was discovered that the new ink it used was toxic? How could a printer operate without paper? An online stock broker would be out of business if the Internet went down, and a contractor would be out of luck without concrete, lumber, or steel.

Is this a concern to you as well? What are you doing to identify and treat supply chain risks? Do you use questionnaires or flowcharts to find them? Can you tell us about an unapparent supply chain risk you have identified and how you treated it? What recommendations do you have for uncovering and handling these risks? Please share your ideas and solutions.

Many thanks for the trust and confidence you place in IRMI and the information we provide to you.

Have a great day.

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Avoid a Carbon Monoxide Headache—Carbon monoxide is colorless, odorless, and deadly. One of the early signs of carbon monoxide poisoning is a severe headache -- and that's exactly what many insureds get when they submit a liability claim resulting from death or injury due to carbon monoxide poisoning. Insurance companies argue that such claims are barred by the CGL pollution exclusion. (See "Pollution Exclusions in CGL Policy Bars Coverage for Carbon Monoxide Poisoning.")

The pollution exclusion was intended to eliminate the catastrophic Superfund environmental exposures, but it is often read to exclude claims that were accepted by insurers without problems under previous policy wordings. To ameliorate this problem, Insurance Services Office, Inc. (ISO) has over the years added exceptions to the pollution exclusion that provide coverage for claims arising from such things as hostile fire, motor vehicle lubricants, etc. A recent broadening was the addition of an exception for claims due to fumes, etc., from equipment used to heat, cool, or dehumidify a building or to heat water for domestic use. This coverage is included in the latest ISO commercial general liability (CGL) form (CG 00 01 12 07) and is available by endorsement (CG 21 65 12 04) for use with prior forms.

That's the good news. The bad news is twofold: (1) not all carbon monoxide cases arise from heating, etc., equipment (the one in the IRMI article mentioned above didn't); and (2) many larger insurers use their own forms when insuring middle-market and national accounts. In reviewing policies for our clients, more often than not we find non-ISO CGL policies, and in a surprising number of cases, we find the broadened wording missing.

You have to seek amendments to those policies to close the gaps. Better policy wording beats telling your client to take two aspirin and call a doctor if the pain persists.

By: Jerry Trupin, CPCU, CLU, ChFC
Risk Management Consultant, Trupin Insurance Services
Briarcliff Manor, NY

SUGGEST A RISK TIP: Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll acknowledge your contribution as we did for Jerry.

What's New in Captive Insurance Company Reports

The June issue begins with "Captives and the Subprime Crisis" by William Dalziel of London & Capital. It presents an overview of the subprime crisis and the larger credit crisis behind it, and concludes with five lessons for captive practitioners.

For IRMI Online and Print subscribers

For SilverPlume Sage subscribers

New Expert Commentary

There are over 1,000 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

Post-Katrina Turmoil: Insurance Solutions—Rob Olson recommends a multi-pronged approach to achieve success in the age-old wind versus water debate.
CGL Insurance 2007 Edition—A Summary of Changes—While tempting, it's not wise to dismiss the December 2007 ISO changes. Craig Stanovich provides a synopsis.
Third-Party Administrators: Quality versus Price—The wise consumer will analyze the quality indicators first and then compare price when selecting a TPA. Glenn Brown Explains.
Insurer Financial Security Is Not a Rating—It's been over 10 years since the last rash of insurer failures. Pete Polstein wonders whether recent poor financial judgment will spell déjà vu.

Best-Seller for Summer Reading

Brush up on your knowledge of both OCIPs and CCIPs with the most comprehensive information source available. The Wrap-Up Guide provides a balanced treatment of the perspectives of both wrap-up sponsors and contractor participants. Get the insight of 14 construction risk and insurance professionals today.

Please Share this Issue with Your Colleagues

If you haven't already done so, please send IRMI Update to your business associates. Thanks so much!

How To Subscribe/Cancel IRMI Update

IRMI Update is sent to subscribers by plain text e-mail twice each month. To initiate your free subscription, use the IRMI Update e-mail registration form.

IRMI Update—Issue #186

In This Issue