Category Archives: Safety

Driverless Cars Not a Concern, Allstate Says

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Driverless car

Driverless cars are becoming more of a reality, with testing in full swing by Google and others, and software upgrades underway for existing models of Tesla cars. One industry that will be impacted by larger number of safe vehicles on the road is the auto insurance industry. One insurer, Allstate, is carefully following the progress being made, but emphasized safety over possible diminishing profits. In its annual report for 2015, Allstate wrote:

Consider what is happening with autonomous cars. Today, only modest levels of driver-assistance technology are available, and only on a limited set of vehicles. However, the technology for fully autonomous cars is advancing rapidly and the legal and regulatory framework will follow. At some point, the fleet of a quarter-billion vehicles could be smaller and will include technologically sophisticated vehicles that are safer, more effective and efficient. Fewer, safer cars would benefit consumers and the environment, but could affect demand for auto insurance.

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The financial squeeze that autonomous cars could put on the insurance industry has been expected for years, The Chicago Tribune noted. In 2012, financial technology consulting firm Celent published “A Scenario: The End of Auto Insurance: What Happens When There Are (Almost) No Accidents?

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While Allstate states that demand for auto insurance could diminish, it points out that this is not a concern. “Some industry participants are waiting to see how this will play out. Allstate is not,” the insurer said, adding:

We are moving forward into uncertainty rather than wait. Throughout our history, Allstate has led from the front on auto safety—for example, as an early proponent of seat belts and air bags. We support the introduction of new driver-assistance technology that makes driving safer, because this is about saving lives and protecting the hopes and dreams of those who depend on us. We are confident Allstate will thrive in whatever new world emerges because of a differentiated strategy, strong brands, passionate agency partners and committed employees. Preparations for a new and different future are well under way.

Lance J. Ewing, hospitality and leisure industry practice group leader with AIG, previously told Risk Management magazine, “With more than five million vehicle accidents in the U.S. resulting in over 30,000 deaths, any enhancement is welcome, but there may be collateral results from the driverless highways.”

Galaxy Quest: Assessing Space Commercialization

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If a bunch of kids can launch a satellite into space, why can’t you?

As reported by the Washington Post, seventh-graders at St. Thomas More Cathedral School in Arlington, Texas are the first grade school students to send a satellite into orbit. The CubeSat – built by the children – was launched into space and will begin beaming photos from 200 miles above the Earth’s surface to an antenna on the school’s library.

This learning experience is remarkable for the kids, but what does it mean for the future of commercial industries in space? While commercialization of space tourism and satellite technology is already happening, is this emerging risk something that industries can afford to overlook?

The Space Foundation’s 2015 “The Space Report” found that commercial activities in space continue to increase and now make up 76% of the global space economy. The report adds that revenue from commercial space products and services was dominated by direct-to-home television services, making up more than three-quarters of the global commercial space products and services market.

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Space budgets

Allianz published an article that outlines some of the challenges of space insurance and space risks, from the pre-launch phases to in orbit operations and satellite insurance.

“Losing a spacecraft is by far not the only risk,” the article points out. “Potential interruptions of a satellite’s service in our globalized work are just as problematic for spacecraft users, individual transponders users such as TV channels and Internet providers, but also for banks, car manufacturers and large industries that use telecommunications networks.”

According to the Federal Aviation Administration’s (FAA / AST) Annual Compendium of Commercial Space Transportation: 2016, “The size of the global space industry, which combines satellite services and ground equipment, government space budgets, and global navigation satellite services (GNSS) equipment, is estimated to be about $324 billion. At $95 billion in revenues, or about 29%, satellite television represents the largest segment of activity.”

The report highlights the progress China has made with its space program, noting the number of orbital launches conducted by the country has steadily increased each year since 2010, with a peak of 19 launches in 2012. The findings highlight China’s commitment to commercial space applications, specifically stating that the data “points to a robust future in Chinese spaceflight.”

For many industries, the idea of planning for the risks involved in a space expansion might seem too far off to devote resources. But, with commercial airliners, telecommunications companies, international markets like China and even a bunch of seventh-graders already investing in opportunities in space, it might be time to reconsider the possibilities and the risks.

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NYC Crane Collapse Part of a Troubling Trend

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NYC Crane Collapse

Last week’s crane collapse in Lower Manhattan, which killed one person and injured three others, has heightened focus on crane safety, resulting in stricter rules for operators. The 565-foot crane toppled as it was being secured against high winds as a safety precaution.

More than 140 firefighters responded to the disaster in addition to police officers and utility workers who were there in case of gas leaks or other damage caused by the impact.

Mayor Bill de Blasio called for an investigation and instituted new safety policies effective immediately, while ordering that 376 other crawler cranes and 53 larger tower cranes currently operating in the city also be secured. The new rules require crawler cranes to cease operations and go into safety mode when there is a forecast for steady wind speeds of at least 20 miles per hour, or gusts of at least 30 m.p.h. Previously, cranes were allowed to operate until measured wind speeds reached 30 m.p.h. or gusts increased to 40 m.p.h.

“I want people to hear me loud and clear: We’ve had some construction site incidents that are very troubling,” de Blasio said at a news conference. “We have more and more inspectors who are going to get on top of that. We’re going to be very tough on those companies.”

He added, “We’ll send advisories to crane engineers when wind conditions warrant it, and engineers will be required to certify that they will indeed cease operations. If we don’t receive this certification, we will be issuing violations and we will raise the base penalty for failure to safeguard a site from the current $4,800 to $10,000.”

While construction in the city has increased over the past two years, the New York Times reported that the rise in deaths and injuries has exceeded the rate of new construction, that supervision at building sites was often lacking, and that preventative safety steps were not being taken.

Indeed, the list of incidents involving cranes has grown to eight since 2008, according to ABC News and the Associated Press.

— March 2008: A nearly 200-foot-tall crane fell as it was being lengthened in a neighborhood near the U.N. headquarters, demolishing a townhouse and killing six construction workers and a tourist. The crane rigger was tried and acquitted of manslaughter. An inspector accused of falsely saying he had checked the crane days before it toppled was acquitted of charges related to the collapse but convicted of falsifying inspection records related to other cranes.

— May 2008: A tower crane snapped, fell apart and crashed into a Manhattan apartment building, killing the crane operator and a construction worker on the ground. The crane owner was acquitted of manslaughter. A mechanic pleaded guilty to criminally negligent homicide. Together, the 2008 collapses prompted the resignation of the city buildings commissioner and a bribery case in which the city’s chief crane inspector pleaded guilty to taking payoffs to fake inspection and licensing exam results. The collapses also led to new safety measures, including hiring more inspectors and expanding training requirements and inspection checklists.

However, Comptroller Scott Stringer said in a 2014 audit that the city Department of Buildings hadn’t fully implemented safety recommendations on cranes and other issues, and Stringer reiterated his concerns Friday. The Department of Buildings disputed some of the audit’s conclusions, but spokesman Joe Soldevere said the agency had implemented many of the comptroller’s recommendations and “there is more oversight of cranes in place than ever before.”

— October 2012: A crane’s boom nearly snapped off and dangled precariously over a block near Carnegie Hall during Superstorm Sandy, as winds gusted to an estimated 80 to 100 mph. No one was injured, but people in a nearby hotel and other neighboring buildings had to flee in the midst of the storm as engineers scaled 74 stories to make sure the crane wasn’t in danger of falling.

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— April 2012: A mobile crane’s boom fell and broke apart while hauling rebar at a subway station construction site, killing a worker. The site was exempt from most city construction safety rules because it belonged to a state transit authority.

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— January 2013: A crane’s 170-foot-long boom fell and pulled down part of the wooden framework of an apartment tower under construction in Queens, injuring seven workers. Three workers had to be extricated from beneath fallen machinery.

— April 2015: Hydraulics malfunctioned on a small crane mounted on a truck while a worker was inspecting it in Manhattan, causing the boom to collapse and fall on him, killing him. The device wasn’t subject to the same regulations and inspections as larger cranes.

— May 2015: A mobile crane dropped a 13-ton air conditioning unit being placed atop a Manhattan office building. The air conditioning equipment fell 28 stories into the middle of an avenue. Ten people were injured by debris, and part of the building facade was shattered.

Legal Woes Highlight Dangers of the Food Industry Supply Chain

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A spate of recent cases offers a clear warning for the food industry about the legal and reputational perils of not getting more serious about supply chain control.

On Monday, the U.S. Supreme Court declined to consider an appeal from Nestle, Archer Daniel Midlands Co. and Cargill Inc., allowing a slave and child labor lawsuit to proceed against the three food industry giants.

Three plaintiffs who claim they were trafficked from Mali as child slaves and forced to work harvesting and cultivating beans in Cote d’Ivoire, and allege that the companies aided, abetted or failed to prevent the torture, forced labor and arbitrary detention they suffered.

According to Reuters:

The plaintiffs, who were originally from Mali, contend the companies aided and abetted human rights violations through their active involvement in purchasing cocoa from Ivory Coast. While aware of the child slavery problem, the companies offered financial and technical assistance to local farmers in a bid to guarantee the cheapest source of cocoa, the plaintiffs said.

The defendants knew about the child slavery problems in the region and offered both financial and technical farming assistance to support the agriculture methods in place, the plaintiffs claim. What’s more, they say, the defendants could have used their leverage in the cocoa market to stop or limit the alleged child labor practices and failed to do so.

According to the Wall Street Journal:

Mark Theodore, a partner at Proskauer Rose, said that the ruling reinforces to companies that they need to be socially responsible employers. And while there is no way to ever completely prevent such risks, he said the ruling is a reminder to companies that they “should be monitoring and also maybe doing a little bit of introspective thinking about their own practices to avoid these things, or prevent them from happening, or to put themselves in legally defensible position if they can’t prevent them.”

In September, the Justice Department finalized a landmark conviction of the former head of the Peanut Corporation of America, who was sentenced to 28 years in prison for knowingly shipping salmonella-tainted products that sickened 714 people and killed nine. That may be the department’s first step in a new approach to taking food industry product safety more seriously, and more aggressively pursuing wrongdoing on a criminal level. The Justice Department has now opened formal investigations into the e. coli outbreak at Chipotle and the listeria outbreak at Blue Bell Creameries, both of which sickened hundreds of consumers.

The department has already signaled a broad intention to focus more efforts on individual law-breakers in corporate crimes. Now, the government appears to be showing the food industry that things are changing in terms of corporate responsibility and food safety, according to Andrew Lankler, partner at Baker Botts. Lankler told the Wall Street Journal that the Department of Justice is signaling that whatever standard the food industry thought it needed to meet for food safety, the bar is higher. “The department is going to step up enforcement in areas where they can prove they sold tainted product,” he said.

And the trouble at Chipotle shows little sign of abating. The CDC is still investigating multiple outbreaks, and the chain has now been served a subpoena as part of a criminal probe by the U.S. Attorney’s Office and the Food and Drug Administration’s Office of Criminal Investigations regarding an isolated norovirus incident in August.

A fourth lawsuit was recently filed by a customer who claims he was sickened by the same strain of e. coli linked to Chipotle, but this case dates back to July, meaning far more people may have been affected in the outbreaks. At least nine suits have been filed by customers, and Bill Marler, a food and safety litigator in Seattle, claims more are coming from the 75 Chipotle-related clients he represents.

At this week’s ICR conference this week, CEO Steve Ells said he is hopeful that the CDC will soon declare the restaurant’s e. coli outbreak over, adding, “we know that Chipotle is as safe as it’s ever been before.”

To that end, Chipotle announced today that it will close all of its stores on Feb. 8 to have a corporation-wide meeting with all staff regarding food safety.

But customers remain extremely wary. Indeed, while it may be an e. coli cliché, it would not at all be a stretch to say public opinion about the brand remains in the toilet, with YouGov’s BrandIndex score for the company seeing a drop equal to that of GM during its crisis.

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To combat that, the company also announced plans to launch a sizable new marketing campaign to win back customers, using direct mail and traditional advertising to attempt to win back consumer confidence. As Fortune reported, executives said the campaign will attempt to provide a “detailed story of what happened” to explain to customers why they are now safe, and that it will not focus overtly on food safety, but will have “an undertone” of humility.

Chipotle’s stock dropped nearly 42% in the wake of the outbreaks, and according to an SEC filing, sales at stores open more than a year were down 30% last month. Ells and his team admitted they could not guess how much the fallout will impact 2016 financial results, but expect it will be a “messy” year. Costs are expected to go up from the marketing campaign and new food safety measures, including processing more food through centralized kitchens in an attempt to better control the conditions of ingredients.

The company darkened its outlook for Q4 results, and As Wells Fargo Securities wrote in a recent research note, “We expect CMG to point to a hard-fought and long-tailed [same-store sales] recovery across 2016, and to stress that there is still much work to be done in assessing the sizeable costs associated with the company’s supply chain overhaul.”

For more about food safety crises and product recall, check out the following articles from Risk Management:

Feeding an Appetite for Trust, A Q&A with Center for Food Integrity CEO Charlie Arnot

Food Safety Updates Stalled by Funding

Maximizing Coverage for a Product Recall