Potentially explosive cargo,stressful week-long drives and unpredictable weather conditions arejust a few of the many risks trucking-company Quality DistributionInc. (QD) has to overcome in transporting bulk items for clientssuch as DuPont, Bayer, Sunoco, ExxonMobil, Procter & Gamble andUnilever.

Since many of the goods carried by QD's trucks—among themplastics, dry and liquid food-grade items, and oil—will eventuallybe processed into other items, the contents of its trucks aretypically in highly concentrated forms that can be poisonous orflammable if spilled.

“Transporting hazardous materials presents a real set ofchallenges,” says Mike McDonald, vice president of enterprise riskmanagement at Tampa-based QD. “We transport chemicals from adatabase numbering 15,000 substances, many of them lethal.”

McDonald, who has been with QD for nearly a decade, knows wellthe daunting list of exposures faced by trucking firms: He has beenin transportation risk management for 35 years, with experiencethat includes working in a risk-management capacity at RyderSystem, another national trucking company.

The trucking industry is, in essence, one long supply chain—andit is essential to the U.S. economy.

“Most of the products transported in this country move ontrucks,” notes McDonald. “It's too expensive to put goods on anairplane, and railroads can only go where the tracks are. Buttrucks can go everywhere.”

Leading the loss-control efforts that come with such a massiveundertaking—and staying compliant with an array of federaltransportation laws governing everything from worker safety to thesafeguarding of chemicals—obviously requires some seriousrisk-management capabilities.

Here's how McDonald copes with one of the toughest assignmentsin risk management.

SAFETY TRAINING AGAINST MYRIAD HAZARDS

According to the Pipeline and Hazardous Materials SafetyAdministration (PHMSA), a division of the Department ofTransportation (DOT), more than 8,000 incidents involving theaccidental exposure of hazardous materials while they were beingtransported have occurred thus far in 2012, causing upward of $45million in damages. Driver error was a leading cause of theselosses.

PHMSA spokesman Gordon “Joe”Delcambre Jr. points out that cargo-tank rollovers account for 31percent of large-truck rollover crashes. “In 75 percent of thosecrashes, unsafe driver behaviors such as inattention or excessivespeeding are the primary causes,” he says.

Given those statistics, one of the most important strategies QDpursues to control the company's liability is hiring and trainingthe best drivers—who can avoid the many perils on the nation'shighways.

To ensure that all the drivers QD uses are prepared for theresponsibility of maintaining the safety of their cargoes—and thepublic with whom they share the road—the company requires an annualDOT-mandated physical, drug-screening, and a background check ofmoving violations.

If they pass these checks, drivers progress to one of severalregional four-day training programs hosted in Salisbury, N.C.;Joliet, Ill.; and Houston.

There, students learn about hazmat handling and transloading(moving loads from railroad cars to trucking containers); theproper use of safety equipment; and how to pull tankers filled withliquid. If they complete that program (and if, McDonald emphasizes,they still want to drive for safety-focused QD), the company pairsthe new hire with a trainer for up to two weeks.

McDonald himself went to the Houston school for a day to examineits teachers and curricula.

“Afterward, I took all my claims adjusters down to the Tampaterminal to work on one of our trucks so they could find out justhow difficult of a job this is,” he says.

Everyone on this site visit soon learned that “not only do ourdrivers manage the wheel, but they load and unload the products bythemselves. We're that kind of company: aggressive, hands-on and incontrol of our costs.”

ACCIDENTS DO HAPPEN: THE SPILL DRILL

However, not all accidents are preventable through drivervigilance—and if an incident does occur, QD can call one of its twospecialty North American environmental-emergency response vendors:American Compliance Technologies and Emergency Response &Training Solutions, both of which maintain a network of cleanupcontractors that can respond to a scene at any time of day ornight.

The emergency contractors provide spill-tracking and managementin compliance with OSHA, EPA and DOT regulations. Cleanupspecialists can identify the hazardous or nonhazardous materialthat was spilled; remove, transport and dispose of the leakedproduct; and treat the contained spill site.

Additionally, QD maintains twocall centers—one dedicated to claims and another to ERMissues—staffed by a total of 17 employees and seven full-time riskprofessionals who address both its insured and enterpriserisks.

In situations such as equipment impairment, accidents or spills,the claims center gets the call.

The Extended Services center deals with incidents that don'tdirectly cause claims but that can create business interruption. Itwould, for instance, take a call from a driver whose debit card isnot working at a gas station and wire him or her money.

UNDERWRITING LARGE FLEETS NO SMALLCHALLENGE

The size of Quality Distribution's fleet—3,300 tractors (or“power units”) and 7,500 trailers—makes insurers take a long, hardlook before underwriting QD's risks, says McDonald.

Like many other companies dealing with potentially perilousmaterials, QD has had to find an additional self-insuring solutionto make sure all its bases are covered.

“Insurance companies look at you differently if you ownthousands of trucks versus hundreds,” says McDonald. “Insurers viewlarge trucking companies as a much greater risk than a smallcompany in terms of power units. If my company has 200 trucks, Ican get 50 quotes from insurance companies.” Come in with a fleetthe size of QD's, however, and that list of potential insurersshrinks considerably.

The company's Trucking and Auto Liability, General Liability,and Workers' Compensation are underwritten by Zurich.

Because QD is “very confident inour ability to control the magnitude of claims,” McDonald says, thecompany is willing to take a $2 million-per-claim deductible forits Auto Liability exposures.

The trucking company self-insures against physical damage to itsfleet and other equipment. And in the trucking business, costs fora total loss of equipment can be substantial. For example, a newtrailer-pulling tractor can cost up to $125,000, and a specialtyhazmat trailer falls within the price range of $55,000 to$150,000.

Damage to this expensive trucking equipment doesn't alwayshappen on the road, either.

“Equipment damage is often caused by putting the wrong cargo inthe wrong tank,” says McDonald. “I'll bet you didn't know thatconcentrated mayonnaise can eat through stainless steel prettyquickly.”

To help avoid such potentially disastrous snafus, full-timechemists are employed by QD's environmental and tech-servicesdepartments.

“Whenever we need to transport a new substance, the product hasto go by the chemist to be paired with the right type of tank toavoid pitting and internal damage,” McDonald adds