The insurance industry is facing its most difficult period in almost 40 years. Major property damage caused by fires, hurricanes and tornadoes are just a few of the issues the industry is currently dealing with. The same rampant inflation affecting you and me also affects the cost of rebuilding and the repair of vehicles. Perhaps most frightening are the nuclear claim verdicts being handed out, as the general public believes that the insurance industry has unlimited resources to pay these inflated claims.
The insurance industry’s struggle to remain solvent in these turbulent times is not only affected by what goes on in the United States but also by what is happening on a global scale. In January 2023, it was reported that property reinsurance worldwide increased by up to 50% for the coming year. This will force property premiums to rise in 2023. In addition, some insurance companies reported substantial losses in the last two quarters of 2022.
Thirty years ago, when PT Risk Management started insuring propane marketers, there were only a few insurance carriers that were willing to write propane accounts.
Over the years, there have been many insurance companies that have started to write propane insurance and have not been able to afford the losses and withdrew. This article lists a few examples of “why.”
Example 1
A propane company filled a cylinder, which a customer placed in a camper. The camper exploded after the owner drilled out the heating orifices to make the flame hotter. The insurance company’s claims manager maintained that their customer — the marketer — did nothing wrong when filling the cylinder. They turned down an offer from the plaintiff for the policy limit of $1 million. The jury awarded $50 million. That insurance carrier was forced to stop writing propane.
The Solution
The development and installation of overfilling prevention device valves in all barbeque-type cylinders, which stopped claims for overfilling.
Example 2
A propane marketer purchased a competitor company and did nothing to advise the newly acquired clients what to do if they smelled propane. The new owner assumed that the owner of the purchased company had already educated the customers. A bobtail driver for the company filled a tank, and it ran out of gas within two weeks. The couple that owned the house came home and, not knowing what to do, went down into the basement and turned on the lights. An explosion occurred, severely burning both of them.
At deposition, both parties testified that they did not know what to do when they smelled propane. They never checked the back of the delivery ticket to find the warning of what to do (or what not to do) when smelling propane.
That insurance carrier was not a member of the National Propane Gas Association and ended up being forced to educate their underwriters and claims personnel about propane.
The Solution
The development and standardization of “duty to warn” packets that should be sent to every customer at least once a year and provided to every new installation.
Example 3
A propane company filled many cylinders in the course of a business day. They did not write out bills of sale with the customer’s names or the serial numbers of the bottles. A bottle was incorrectly attached to a barbeque and an explosion occurred. The customer was burned and brought a suit against the closest propane company. There was no proof that the cylinder had been filled by that propane company, and the insurance company couldn’t prove that they hadn’t. The plaintiff won a large judgment against the propane company.
The Solution
Document every bottle filled with an invoice. Even if you just take a cellphone picture with a date stamp of the cylinder’s serial number and upload to your system, that could at least prove that your company interacted with that particular bottle. Furthermore, document every cylinder sold to a customer. Don’t sell anything without a written bill of sale.
Example 4
A homeowner called his propane marketer and said he smelled propane. A service tech went out and performed a gas check. No leak was found. The homeowner called a second time, and the same service tech responded. A second gas check was performed — again, no leak was found. The home ultimately blew up. During the course of the investigation, the marketer was asked for the written gas check forms. They were nowhere to be found. No documented gas check forms were recorded. Why didn’t the tech just shut off the tank? The marketer had no evidence to protect the company, so the insurance company was forced to pay a large judgment.
The Solution
Management needs to check to see that all gas check forms are in writing and signed.
Conclusion
When I hear of a propane claim that should not have happened, I get mad because it ripples throughout the insurance industry. First, it can cause senior management at the insurance companies to rethink writing for propane marketers. Second, it can cause the tightening of restrictions for the underwriters and, therefore, for all marketers. Third, and probably most important to you, it always causes premiums to increase across the board.
Propane marketers need to realize that they cannot sell propane to the public without insurance. The insurance companies that write propane accounts need to make a profit to continue to cover our industry. Insurance premiums will continue to increase if we don’t focus on safety. Propane marketers need to utilize the safety tools available to them to help the insurance industry realize that marketers are fully complying with safety protocols.
- Duty to warn packets must be given to every customer annually and to each new customer upon installation.
- There must be written gas check forms on every customer and new installation.
- Out of gas calls are to be taken seriously; written gas check forms must be submitted and kept on file.
- Dispensers at non-owned locations need to have a written contract in place to be insured.
- Property values need to be reevaluated annually and adjusted based on current market conditions.
- Write out a receipt for every cylinder filled and keep track of the serial numbers of all bottles you touch.
- Save all renewable identification number (RIN) information.
- Modernize information collection so the tech has a written copy of the completed gas check form to give to the customer.
