February 2008 | Commentary | Risks and Rewards

The Perils of Trucking: It Takes a Thief

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Q: I am expanding into Central and South America and need trucking insurance to cover my cargo. Can you help me?

A: This is a common question from shippers who cannot obtain cargo insurance, from forwarders who are unable to get liability insurance, and even from truckers who are required to secure cover before any cargo is entrusted to them.

The unfortunate reality is that trucking is a perilous form of transport in any part of the world. In the United States alone, insurers face a multitude of claims each year resulting from theft of goods in transit. In countries outside the United States, including South and Central America, the situation is not much better.

At times, thefts are brazen. Several years ago, armed robberies became so common in northern Mexico that some truckers began moving cargo in convoys.

At other times, the creativity thieves use to pull off heists is limited only by their imagination.

In an incident in Panama, for example, thieves cleverly removed the pins from a container's hinges and carefully removed the doors without causing any damage to the security seal. They then removed several cartons of electronics products, returned the doors to the container, and sent it on its way. The electronics were later seen being sold by local street vendors.

In Ecuador, thieves were able to partially open the doors of several containers carrying sacks of coffee beans. They tore through the sacks with hollow tubes and siphoned off significant amounts of coffee beans.

Cargo theft is a crime of opportunity. While it is not uncommon for thieves to lie in wait for an opportunity to present itself, it is more common for people having inside knowledge to give the opportunity to fellow conspirators.

In Cartagena, Colombia, a trucker delivered what appeared to be complete documentation to the port, and obtained the release for a shipment of auto parts. It was later discovered that the documents had been falsified, and the shipment was nowhere to be found. An investigation revealed that an employee at the port had used his inside knowledge to facilitate the theft.

It's no wonder that insurers are reluctant to offer a cover.

Preventing Theft

Even in the best of circumstances, it is prudent to employ targeted security measures to minimize potential losses. Here are some suggestions:

  • Choose a reputable local partner who knows the region well.
  • Verify that this partner uses its own employees to operate company-owned vehicles.
  • Employ only the services of trusted third-party truckers when outsourcing is required.
  • Ensure that your third-party truckers have appropriate insurance and verify all insurance certificates.
  • Check that your partner's documentation system employs internal security procedures.
  • Establish that only trusted employees can access areas containing sensitive information.
  • Ensure that drivers stay in constant communication with their dispatcher.
  • Have your local partner install checkpoints along established routes whenever possible.
  • Establish a notification and security procedure for when vehicles must be left unattended.

Remember, aside from being comforted by your security measures, the insurer also needs an adequate spread of risk. This limits the impact any claims may have on its bottom line.

It is far more difficult to insure a one-off shipment than it is to insure your entire operation. For this reason, it might be worthwhile to offer your insurer a substantial volume of your business, not just the risky part.

Have a liability question or concern? I will try to help. Please send your questions to me via e-mail at dan.negron@thomasmiller.com.

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