Ryan Brown's risk management education really took root as he dug into Raben Tire Co.'s umbrella liability insurance coverage.
The family-owned tire business-which generates around $140 million in annual revenues and employs more than 600 workers at its headquarters and 37 retail outlets-was carrying $4 million in umbrella coverage in 2002. That's when Mr. Brown, then the company's safety director, decided that Raben Tire's insurance program needed a hard look to determine whether its limits were adequate.
He decided he needed help in analyzing the Evansville, Ind.-based dealership's exposures and existing insurance to arrive at the appropriate amount of umbrella coverage. What he found was someone who not only helped with that task, but also taught him a thing or two in the process.
``I was searching for a consultant-someone who wasn't in any type of selling capacity-to take a look at our umbrella and take a look at our company and give us an honest, objective opinion'' regarding the coverage, Mr. Brown said.
Gordon Dudley, then an independent risk management consultant in Battle Creek, Mich., fit the bill.
``I got a consultant that really turned me on to risk management in terms of looking at our business and having the right approach for risk management-how to scientifically look at how we manage risk'' and make solid risk management decisions, Mr. Brown said.
Mr. Dudley said his partner in the assignment showed a high aptitude for his work and quickly caught on to what needed to be done. ``He was like a sponge,'' Mr. Dudley said of Mr. Brown's ability to soak up information. ``He had a firm understanding of the need to restructure the program, to beef up loss control and risk management.''
At the time, Raben Tire carried $500,000 of underlying liability coverage on its general liability, garage liability and automobile liability risks, but its employment practices, fiduciary and directors and officers liability exposures were uninsured.
Mr. Dudley ``really walked us through the renewal period'' in October 2002, Mr. Brown said. His help ``really made the underwriting process for Raben Tire a lot easier for the insurance company.''
When the coverage was renewed in the fall of 2002, Raben Tire doubled its umbrella limit to $8 million and added $1 million in underlying insurance to cover the previously uninsured liability risks. Both limits were increased over the next three years and, at the 2005 renewal, the company bought $15 million in umbrella liability limits and $5 million in limits from Fairfield, Ohio-based Cincinnati Insurance Co. That covered the EPL (employment practices liability), fiduciary liability and D&O (directors and officers insurance policy) risks.
``I learned a tremendous amount about how to go about being a customer for an insurance company,'' Mr. Brown said.
``I took copious notes. (Mr. Dudley) was a very expensive consultant and well worth every penny,'' he added, because the knowledge Mr. Brown gained from the process has allowed him to handle the renewals on his own for the past three years.
``I took a step back'' after the 2002 renewal was completed and worked more as a mentor than a consultant, said Mr. Dudley, who now works as marketing manager for new business at Moody Insurance Agency in Denver. He has kept in touch with Mr. Brown since they worked together.
Mr. Dudley's guidance also led to other changes in the company's coverages.
Among the biggest liabilities Raben Tire faces is garagekeepers liability. Among such claims are those from car owners whose vehicles are damaged while being serviced or suffered damage later because of an inadequate repair.
The guaranteed-cost product that was in place from Cincinnati Insurance ``did not work for us,'' Mr. Brown said. Not only was it expensive, but it also did nothing to encourage managers to prevent accidents because they knew insurance would pick up the cost, he said.
``We went from that to a very high deductible, and we make the stores take on more risk,'' Mr. Brown said.
Raben Tire carries a $50,000 deductible on its liability coverages. In turn, each store has a $15,000 deductible on workers comp exposures and $10,000 each on auto liability, garagekeepers liability and general liability lines.
But for one particularly serious type of claim, a store must absorb the entire $50,000 deductible: those in which a vehicle suffers damage when a wheel that has been serviced by Raben Tire comes off. That is a problem the company has worked hard to prevent through training and the use of state-of-the-art wheel-torquing equipment, Mr. Brown said.
Each store's premium payments depend on loss experience. Store managers who are able to ``follow our policies, manage their losses, programs and training-they get to go the whole year with a low premium,'' Mr. Brown said.
Cincinnati Insurance also writes Raben Tire's property coverage to protect its headquarters and retail outlets, which in total are valued at around $22 million. Limits are written to the value of the properties, and Raben Tire assumes a $10,000 per-loss deductible.
Though property losses have been few, the exposures do carry some unique risks.
Because it has a large inventory of tires-approximately 60,000 valued at about $4 million at its Evansville location and another large inventory at a Cincinnati facility-Raben Tire might as well be storing ``dynamite, from an insurer's perspective,'' Mr. Brown said. If the tires catch fire, they will generate a tremendous amount of heat. ``You're not going to put them out,'' he said.
The Evansville and Cincinnati facilities are equipped with sprinklers, and fire department officials have examined the way the tires are stored and have become familiar with the layout of the buildings, in case they have to respond to a fire. Fire officials also have visited some retail stores that have large tire inventories, according to Mr. Brown.
All of Raben Tire's coverages except workers compensation are placed with Cincinnati Insurance through a local agent, Norbert Niemeier of ONB Insurance Group in Evansville. Mr. Brown deals directly with the company's workers comp insurer, Boston-based Liberty Mutual Group Inc.
Mr. Niemeier pointed out that Mr. Brown-who was hired as the company's safety directory and currently serves as the company's director of risk management and fleet operations-was quick to catch on to the insurance side of his job. ``He is so knowledgeable it's unbelievable.
``I've been doing this for 35 years, and I would put Ryan with any insurance agent in understanding the policies, the depth of the coverage.''
``He's one of a kind,'' Mr. Niemeier said. ``You just don't run across people of his caliber very often.''
Mr. Brown said he learned from Mr. Dudley that safety is part of a bigger responsibility, like a branch on a tree.''
``Risk management,'' he said, ``is the tree.''