A continued rise in crane accidents is driving change throughout the insurance sector, says UAA.
The last two years has seen the crane sector experience stresses and strains not experienced before. The volume of work for crane hire businesses has increased exponentially for some, the shortage of skilled labour has also increased, and some crane companies are becoming extremely anxious around the availability of quality resources.
According to George Grasso, chief services officer for UAA, there is a constant battle for companies to keep quality staff, manage expenses and make every effort to maintain a high level of training and OH&S standards, coupled with the ongoing pressures of new enterprise bargaining agreements and COVID-19.
As such, there has been an increase in the number of crane accidents whereby incurring large losses in material damage to machines and exposure of horrendous proportions and what seem to be outrageous legal liability demands from allegedly affected third parties.
Many insurers globally in this segment are reducing their capacity to insure this industry and or are forced to increase rates to remediate such losses from both material damage and legal liability (Third Party Property and Personal Injury), or have removed themselves from the industry completely, he says.
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“2019 was an horrendous year as far as the number of crane incidents we’ve had to deal with and almost all of them appear to be a result of extraordinary costly but simple mistakes.
“We have seen a lot of these types of incidents. As the old saying goes, ‘faster the haste, slower the pace’, but incidents are occurring because operators, riggers and dogman, who were already faced with time constraints, are even more time poor. This has led to very expensive machines being damaged, not being available for work and having to go through the time-consuming process of being repaired. In every instance, the customer is reliant on the insurance company to oversee the repair process,” said Grasso.
Grasso confirms UAA is a long-term supporter of the crane industry, it has been for many years and it will be for a long time to come but, if the current level of incidents continue it will be reflected in increased insurance premiums.
“If the number of incidents going to continue to grow, it is inevitable that it will have an impact on insurance premiums to offset such costs, none of us want this. We want to encourage all crane businesses to take a step back, refocus on their people and processes, understand where they are at regarding training and examine how competent they are at operating the machines, rigging and dogging. We also think putting in place better controls, measures and incentives to encourage staff to be more diligent and focused on the task in hand should be considered,” he said.
Grasso confirms safe workplace authorities like Work Cover are diligently policing the industry. If there is an incident, whether there is a fatality or no injury, prosecutions can still follow. With some of the recent incidents, Work Cover continue with extensive investigation that will drive change to crane hire companies, manufacturers and the industry as a whole, he says.
Following many of these incidents, it has taken several months to repair the damage to cranes, which is certainly beyond the limit of indemnity for clients with Business Interruption protection. For clients that don’t have the optional extra of Business Interruption Insurance, UAA makes every effort possible to find ways to subrogate from another liable party and will bring in the uninsured losses whether it is loss of revenue, increased cost of working or lack of lease protection in any recovery action against a potential liable third party. Many of these machines are still on finance and the loss of revenue also covers lease repayments. If a client isn’t generating revenue from a crane, lease repayments still have to be made and these can be $50,000 to $60,000 a month in some cases.
In addition to such incidents, the years and costly legal exercises in defending a client’s position with legal liability demands placed upon them, can be exhaustive and emotionally draining for all parties.
“From our perspective, the situation is of increasing concern and UAA knows the industry is only going to get busier. We want clients to take stock of their business, understand what is happening at all levels and examine how to further mitigate potential risk and losses,” said Grasso.
Grasso goes on to discuss the chain of responsibility when there is any incident and what impact this has on the industry in general and insurance premiums specifically, let alone liability exposures and in addition when there is an unfortunate fatality or injury.
He uses the well-known and unfortunate workplace death at the University of Canberra Hospital construction site as the example.
In February 2020 the crane driver charged over the 2016 workplace death of his colleague at the construction site admitted his reckless actions risked the man’s life. Michael Watts pleaded guilty to one charge of reckless conduct, exposing people to serious injury or death, which is a category one offence under the Work Health Safety Act 2011. Herman Holtz, 62, died when the pick and carry crane Watts was driving rolled and hit him at the Bruce construction. The crane rolled while moving an 11-tonne generator.
The ACT Supreme Court heard the crane was operating “in excess of its rated capacity” when Watts used it to move the generator. The move was also “in the absence of sufficient planning; at night with reduced lighting and visibility; and on unsuitable and dangerous terrain.”
Watts was originally charged with manslaughter over the incident. The charge was abandoned in place of the work health and safety offence, which carries a maximum penalty of up to five years imprisonment and a $300,000 fine, or both. Several other parties have also been charged.
“There were a number of extraordinarily unfortunate circumstances involved in this incident. They’ve got a pick and carry crane carrying a generator and it was going to travel over a fair distance, up to 800 meters over dangerous terrain and at night. This is where someone needs to stop for a minute and ask, ‘is there a better alternative?’
“In this instance, the alternative could have been to load the transformer onto a trailer and transport it across the site, then lift it off. It may have been another case of time pressure, but without taking the time to implement safer alternatives, albeit that may cause some minor delays, but is offset by this unfortunate incident that is still ongoing over four years later,” said Grasso.
“You are trying to do the best thing by the project and the construction company, but sometimes you have got to stop and think about the dangers of the task. You now have the operator pleading guilty and you have other organisations and individuals charged. The ripple effect from these types of incidents are both professionally and personally draining, it just doesn’t stop.
“We are also seeing cranes set up on certain sites using in some cases inefficient outrigger pads without taking into account appropriate ground conditions and use of Geotech reports. A little more time and money could be invested to ensure the appropriate pads are used to set up. Yes, it involves more cost and time, and if the client isn’t motivated to pay for additional precautionary measures, there should be an element of the crane company saying ‘how much risk do I really want to take on for this job? Is it really worth it?’, this is where the industry really needs to unify and remain consistent, consistency is key,” he said.
If this trend continues and the level of incidents remain, the industry could be looking at insurance premiums increasing significantly, says Grasso. If there is another bad year like 2019, UAA will have no option but to increase premiums, this is the only way to remain in business and to provide protection to the industry, unlike many other insurers who are exiting the industry as it has become unsustainable for them.
“As the leader in the market with our product and services, and with over 48 years of servicing the industry, the longest standing crane insurer, we want to make sure we remain viable to our customers for many more years to come. We can’t do it on our own, the industry needs to continue to fine tune OH&S practices and mitigate risks.
“You can’t be guaranteed the same level of service and commercial considerations from other insurers because UAA understands and respects the industry. Plus, we are local where other competitors are outside of Australia. In the current market we are seeing other players in this field, particularly those connected with Lloyds of London, exiting the risk of the crane sector. They’ve taken on risk and they’ve been burned,” he said.
“There is a genuine capacity issue in the insurance market at the moment and UAA is concerned about the lack of options for clients, there is nothing wrong with healthy competition. Over the last six months, brokers who have placed their client’s business elsewhere no longer have the capacity to rewrite with them and have now come to UAA asking if we can help them out. This is the reality and it is happening right now, take risk mitigation very seriously, otherwise you can become ‘uninsurable’, particularly as we live in one of the worlds most litigated countries,” said Grasso.