Many insurance companies employ commercial inland marine specialists who underwrite, and sometimes adjust, claims on motor truck cargo policies and warehouse legal liability policies—both traditionally non-filed classes of business. Other insurance companies defer to commercial property or multi-peril underwriters who offer these coverages as an accommodation to insureds or as part of a much larger insurance program. Irrespective of the underwriting, not every adjuster is going to be familiar with the different ways the policies are written, nor are they going to be familiar with the ingenious ways that cargo can “disappear.” By understanding how these losses have occurred in the past, an adjuster faced with a similar loss is better equipped to perform the current loss investigation.
An all too familiar loss scenario is the one that occurs when the driver parks his tractor trailer over the weekend at a parking lot in a large shopping mall, behind a strip mall or in the lot of a manufacturing plant that is closed for the weekend. When the driver returns to the rig on Monday morning, he finds the entire rig and/or cargo has been stolen.
This scenario can happen with virtually any cargo, but is very common when the cargo is of high value and is “theft attractive,” meaning easily fenced. The root cause of this loss scenario is deeper than just the theft that has occurred. It is the nature of today’s logistical model that delivery requirements are on a just-in-time basis.
More and more truckers are asked to deliver loads to the consignee warehouse or distribution center on a specific date and at a specific time, often early on Monday morning. Delivery is rarely set for late in the day or on Friday. This delivery request sets off a chain reaction that actually begins when the driver picks up his load.
Regardless of the distance to be traveled, the trucker will pick up his load sometime before the weekend and be forced to find somewhere to “store” the load until the appointed delivery time. Only the very large national trucking firms have company-owned designated parking facilities nationwide. The sad fact is that truck stops and the various big parking lots mentioned earlier are the only options available to many truckers.
Any adjuster assigned this type of loss needs to determine the following:
- What the cargo was, how it was packaged (cartons, pallets, drums, etc.) and any distinguishing packaging information
- The origin of the load and where it was going
- Who knew the particulars of the shipment
- What the delivery instructions were
- Where and when the rig was parked
- If there was an alarm system, GPS tracking device or other theft prevention device on the rig
- When the loss was discovered
- If the driver checked on the rig while it was parked
- Why the driver picked that location to park the rig
- If there were any physical security measures at the lot, e.g. fences, gates, lights, a watchman, CCTV, etc.
- The company’s policies for parking a loaded rig overnight or on weekends
- If local law enforcement officials were notified that the rig was going to be parked over the weekend
- If law enforcement was notified as soon as the theft was discovered
Many times these thefts are due to nothing more than the fact that they present targets of opportunity. However, cargo theft trends sometimes reveal that there is inside information being shared. In these cases, the adjuster must consider that the driver might be involved and the entire situation was a setup for the theft in a theft ring.
Willie Sutton, a prolific U.S. bank robber, is often quoted when why he robbed banks as saying, “Because that’s where the money is.” Similarly, another common cargo loss trend arises from distribution center or warehouse burglaries because, in today’s logistics oriented world, that is where the stuff is. Gangs will identify potential targets, often spend time studying the operations and the layout of the facility, and may even plant someone on the inside to feed them information.
Most of these losses occur during weekends or in the overnight hours when the facility is closed or sparsely manned. Frequent targets are warehouses storing computers, consumer electronics, apparel and other high valued goods. Cargo thieves are very savvy. They know which companies handle the items of highest value just as they know which trucking companies haul items of high value.
Currently there are three popular methods for gaining entry into a warehouse:
- The burglars cut the telephone lines and wait to see if anyone responds. Typically, one or more people from the alarm company show up to investigate. If the responders see no signs of entry they will leave, or may place the alarm on stand-by or radio backup. This sequence may happen several times until the responder fails to show up at all. At that point the burglars feel “safe” to enter the building through a ground floor door, disable the backup system and remove the tapes from the video security system. They also may disable computers and communications systems. Then they are free to use warehouse equipment, such as forklifts, to load a trailer and make off with the goods.
- The burglars place an upright outdoor ashtray/trash can in a location with a direct view of the numeric access keypad. A video camera hidden in the trash can records employees when they enter using their access codes. The burglars are then able to use one of the codes to enter the building and deactivate the alarm system.
- The burglars visit the targeted facility posing as representatives of the alarm company. They request an alarm code so they can reset the alarm system. The code then can be used to shut off the alarm when they enter the facility later.
Each of these scenarios should trigger a number of questions for an adjuster.
Suggestions for investigating distribution or warehouse losses include:
- Review the alarm system logs
- Interview the responders
- Determine if there are any new hires at the facility
- Determine if both alarm company and client response procedures were followed
- Check the door hinge pins to see if they were damaged
- Check any ashtrays and trash cans near doorways
- Conduct counter-surveillance to spot suspicious activity
- Check the list of visitors to the facility
- Determine if company procedures regarding access codes are followed
These suggestions are only the starting point when it comes to investigating cargo theft from a tractor trailer, distribution center, or warehouse. Investigate thoroughly and follow where the evidence may lead you. Remember that cargo at rest is cargo at risk!
Ronald Thornton, CPCU, President & CEO, Inland Marine Underwriters Association and Donna J. Popow, Esq., CPCU, AIC based on work done by the IMUA Loss Prevention & Claims Committee.