Blindsided

By Bruce Hooker of Mattei Insurance Services

When a waste company is involved in an at-fault vehicle accident or one of its employees suffers a work-related injury, direct costs result. Vehicle accidents incur costs for damage caused to the property of others, for treatment of any injuries and for the cost of repairing the waste firm’s own vehicle. An injured employee covered under the firm’s insurance will incur medical expenses and must be compensated for time missed from work during recovery.

A few very large waste firms may have the financial strength to pay out-of-pocket for many of these direct costs (also known as self-insurance). However, most waste companies will purchase commercial insurance to pay direct claim costs and the administrative costs associated with vehicle accidents and employee injuries. Insured companies may incorrectly assume that the only cost they will face in the event of a vehicle accident or employee injuries is the cost of their insurance premiums, since the insurance company is the one paying the claim. This fails to take into account uninsured costs.

Uninsured costs, sometimes called “hidden” costs, refer to any expenses associated with a vehicle accident or employee injury not covered by insurance. In fact, direct costs are often the tip of the iceberg, as uninsured costs can add up to more than the actual claim paid by the insurance company. These costs may include:

Lost Production Time. This includes time during which an accident or injury forces a collection vehicle to sit idle, a material recovery facility line to shutdown, and a landfill or transfer station to stop accepting material.

Deductibles. These include first-party deductibles, in which the waste company must share a portion of the costs associated with damage to their own vehicle, as well as liability deductibles, in which the waste company must pay for damage to the property of others up to a specified dollar amount.

Actual Cash Value vs. Intrinsic Value. Most waste companies have collection vehicles that are worth a lot more to that waste company than the money they could get by selling them. If one of those vehicles were totaled in an accident, the waste company would be paid the actual cash value of the truck, and may be forced to spend considerably more for a replacement capable of doing the same job.

Personnel Costs. These are costs associated with hiring and training a worker to take over an injured employee’s job functions on a temporary or permanent basis. These costs may include the reduction in efficiency attributable the replacement worker as compared to the work done by the injured employee.

Increased Insurance Costs. Insurance companies calculate an “experience rating” to determine what premium to charge policyholders. This is a method by which the actual losses experienced by a company are compared to the average losses experienced in the company’s rating class. Waste companies that demonstrate superior performance in terms of fewer claims dollars paid out will pay lower premiums than waste companies that have a history of costly claims.

Administrative Costs. These costs include time spent investigating the accident or injury, filling out reports, dealing with insurance personnel, sitting for depositions, and all other non-productive time dealing with the paperwork associated with an accident or injury.

Loss of Reputation. A catastrophic motor vehicle accident or a fatal injury to an employee can  severely damage a waste company’s reputation within the community and with its customers. The financial impact of this diminished status may be felt for years.

This list is by no means a complete account of the out-of-pocket costs that a waste company may incur as a result of vehicle accidents and employee injuries. When waste companies see the total picture of what vehicle accidents and employee injuries are costing them, it becomes much easier to justify investments in safety. It really is a situation of spending a little bit now to avoid paying a whole lot more later.

Bruce Hooker works for Mattei Insurance Services, Inc. based in Sacramento, Calif.