Table Of ContentRuralization of
US Department
ofTransportation Management
Risk
A Handbook for Small Transit Operators
December 1992
CAUTION
CLIFFS
AHEAD
FEDERAL TRANSIT ADMINISTRATION
Ruralization of
Management:
Risk
A Handbook
for
Small Transit Operators
Final Report
December 1992
Prepared by
Erskine S. Walther
Transportation Institute
A&T
North Carolina State University
Greensboro, North Carolina 2741
1
Prepared for
University Research and Training Progrann
Office of Technical Assistance
Federal Transit Administration
Washington, DC 20590
Distributed in Cooperation with
Technology Sharing Program
U.S. Department of Transportation
Washington, D.C. 20590
DOT-T-93-14
1
= S. o- 3.S ?
^3CT iO3f-l e3(T 2C =3 53 r«-q =S £3 J33 2! 5
—Me12 'i-sa o=Zu 3ei «o m ^^ (O0 O O CN* 1Od^ f<NN od <«N^ p*- »d>i ifl
s
.s
2 e
a
g jl J
i I 5 I
Se(35 i«(35 i«n3 2u«£ 2 ^ g ^TE —awi ^wV) ^cn ^1uu ^uu
< s
ou
o
I
E £ E
e/3
u
<
E3 91 ISI Z\ III ;01 I6
e
I ! I
iiiiiiiiiihi iilliii'liliii Hi
TIT T T TIT TIT TIT 1111111 1111111 11MlI 'I'IU* 11*I'I' II11>l>
(J
1 inches
1 ;^ Er0£1 £s S3? 9O3" 93O" ^3y
klTA) pd 0O0 U> «o 5
Sa.
1 I
(3ot- (a30 C=-aT (o30" 5 - ^ 3 = 3 « 3 3
a. M
£ _
TABLE OF CONTENTS
CMAr cK UNt: KUUUL lUN ANU LUINLtr b
1 IINII 1 1 1
First A Few Terms C
o
Loss
c.
o
Hazard
rem •J2
KlSK /I
A
Bodily Injury
rroperty uamage A
ort
1
Negligence 5
Statutory Liability 6
Strict or Absolute Liability 6
Deductible 7
Most Losses Are Partial 7
Insurance Carrier 8
Self Insurance or Retention 9
Concluding Comment 9
CHAPTER TWO: RISK MANAGEMENT PROGRAM ELEMENTS
1 1
The Five Parts Of A Risk Management Program 1 1
Risk Identification: Knowing A Risk When You See One 13
Risk Evaluation: How Risky Is A Risk? 1 5
Handling Risks 16
Loss Avoidance 16
Loss Prevention and Control 17
Retention/Self-lnsurance 18
Transfer 20
Implementation 21
Monitoring and Review 22
Concluding Comment 22
LHAr tK HKtfc; LIAdILI Y tArUbUKtb 2OS5r>-":;:
1 I I
Introduction 25
Note On Pollution Liabilities 25
Differences Between Liability Coverages and Property or
Personal Injury Coverages 26
Liability Through Contract 27
Statutory Liability 30
Liability Resulting From Intentional Torts 31
Negligence 32
Defenses Against Negligence 35
Liability Insurance 35
Professional Liability 37
Directors and Officers Coverage 37
Concluding Comment 38
THAPTFR FDI }R" Rl*sl< RFDI IPTIOW AMH n<s<; rOMTRHI
1
Introduction 39
Overview of Approach 40
Human Factors Approach 41
Generic Steps In Applying A Loss Control Program 42
Pre-Occurrence Steps (What To Do Before A Loss Occurs) 43
Equipment 43
Training 45
Routing 47
Biohazard Kits 48
Cleaning A Biohazardous Spill 50
Fire Extinguishers 52
ADA Wheelchair Requirements 55
Self-Inspections 55
Hazardous Materials 57
Occurrence Steps (What To Do While A Loss Occurs) 58
Post-Occurrence Steps (What To Do After A Loss Occurs) 58
Employee Dishonesty: Fidelity Bonds 62
Concluding Comments 63
11
CHAPTER FIVE: INSURANCE CONTRACTS: COMMON COMPONENTS 65
Introduction 65
Components of the Insurance Contract 66
Declarations Page 67
Endorsements or Exceptions 69
Concluding Comment 69
CHAPTER SIX: INSURANCE CONTRACTS: COMMERCIAL AUTO 71
Introduction 71
Commercial Auto: Business Auto Coverage Form 71
Umbrella Liability 78
Concluding Comment 78
CHAPTER SEVEN: INSURANCE CONTRACTS: COMMERCIAL PROPERTY
AND UMBRELLA LIABILITY 79
Introduction 79
Commercial Property Insurance 79
Umbrella Liability Coverage 85
Concluding Comment 87
CHAPTER EIGHT: RISK EXPOSURE QUESTIONNAIRE FOR RURAL
PUBLIC TRANSIT SYSTEMS 89
Who Are You? 89
What Do You Do? 90
What Do You Own, Rent or Lease? 94
What Procedures Do You Have? 102
What Are Your Experiences? 107
What Insurance Coverages Do You Have? 110
iii
r
CHAPTER NINE: QUESTlON-BY-QUESTION GUIDE TO THE RISK
ctvADrrUvcoiUIKDtC nli^UjttorcTliUnNMNMAAIIKDtC 1M1oo
1
Introduction 6
1 1
Question-By-Question Review 4
1 1
wno Are you 11/41
r 1 1
lie
wnat uo YOU uor D
1 1
wnat uo YOU uwn Kent or Leaser 1 oo
IOC
wnat rroceaures uo you naver
wnat Are Your experiences 1 OQ
What Insurance Coverages Do You Have? 129
Concluding Comment 129
CHAPTER TEN: OBSERVATIONS AND SUMMARY 131
Introduction 131
Observations 132
Concluding Comment 135
ENDNOTES 371
1
ACKNOWLEDGMENTS 139
APPENDIX A: LITERATURE REVIEW A-1
Introduction A-1
Representative Insurance Industry Literature of Relevance A-1
Transit Specific Literature A-3
Concluding Comment A-6
APPENDIX B: BIBLIOGRAPHY B-1
APPENDIX C: STATE RTAP COORDINATORS C-'
1
iv
CHAPTER ONE: INTRODUCTION AND CONCEPTS
Orientation To The Report
It is often said that we are born into a world of stories and of
storytelling. This report is an attempt to tell the story of Risk
Management in an easy-to-read, to the point, perhaps witty, and
hopefully helpful way. Although it relies on scholarship, it is not
written in the traditional "scholarly way." It is an attempt to
translate the Risk Management message from the conceptual order
and often legalistic language of the insurance and risk management
professions into the meaning-producing language of the small transit
operator. Basically, this report is an original exercise to tell the
story of Risk Management in a way that will help answer the
questions and, in some cases, calm the anxieties of the provider of
transit services and elevate their understanding of the issues and the
concepts to an action-oriented level of knowledge.
The report is an attempt at making a complex process simpler. While
it is primarily written for the smaller operator providing paratransit
and/or fixed route transit, it should be of value to any transit
operator.
Introduction To The Concept of Risk Management
Risk management is nol insurance. Insurance is only one of several
methods for dealing with risk. Insurance is a method for reducing the
uncertainty of the financial loss that often follows a physical loss
(loss of or damage to physical property or from personal injury) or
from a liability loss (a financial loss following a negligent act). In
this report, insurance will be discussed as one tool in the overall
process of risk management. Since it is a rather important tool, it
will receive detailed attention, but always as part of an overall risk
management process.
Risk management may well be viewed as an overall managerial
philosophy. It provides a way of viewing your organization, how it
Page 2 CHAPTER ONE: INTRODUCTION AND CONCEPTS
behaves (operates) and how it is or should be run. More technically,
risk management is a process of identifying and evaluating all pure
risk exposures faced by the transit system and selecting the
appropriate method or methods for eliminating, reducing or otherwise
handling the risk.
The emphasis here is on the process Effective risk management is
.
not a one shot activity, nor is it simply a once a year review activity.
It is an on-going process. Much of what constitutes that process is
already being done by most rural transit systems, only it is not
recognized as part of an overall system or process of risk
management. For example, if a rural public transportation system has
a vehicle preventive maintenance program or a defensive driving
training program, then it already has part of a risk management
program in place.
First A Few Terms
Before delving into the basic parts of a risk management program,
defining a few basic terms may be helpful. The purist among you may
not like the looseness of some of these definitions, but their
essential correctness is sound. When these discussions move to
insurance policies, then the language will begin to tighten. When it
comes to an insurance policy, the meanings of words have to get
precise. But for now, the focus is on understanding the concepts
behind the words.
Loss
A loss is something that costs you money. It may be in the form of
property that has been damaged or destroyed and has to be replaced or
repaired. It may be real property (a building, for example) or personal
property (a rider's glasses or maybe his/her wheelchair). It might be
in the form of bodily injury when you physically hurt or "damage"
another person. This can range from a simple scratch upon boarding
to an accidental death. Losses may also arise from cases of liability
-- injury to others from negligence or from intentional action.
When you buy insurance, you will be buying different types of
coverage for different types of losses; i.e., bodily injury coverage is
