Business Insurance
Published: 04/27/1998
RISK MANAGEMENT HONOR ROLL:
JUSTIN'S DIVERSITY HELPS SPREAD RISK PROPERTY/CASUALTY
PROGRAM COVERS ALL OPERATIONS, FROM BOOTS TO BRICKS
By MICHAEL A. BRADFORD
A boot maker, a brick maker, a book maker and more.
It's a tongue twister that describes the diversity of companies Jim Green protects as risk manager of Justin
Industries Inc. Not only are the risks a diverse lot, they also are scattered among more than 100
manufacturing, sales and distribution locations throughout the Southwestern United States. Add 4,300
employees, and a challenging workers compensation exposure becomes a part of the mix.
Here's the lineup of operating companies:
The footwear group is made up of Justin Boot Co., Tony Lama Co., Nocona Boot Co. and Chippewa Shoe
Co. All are based in Texas.
The building materials group consists of Fort Worth, Texas-based Acme Brick Co., Dallas-based American
Tile Supply Co. and Austin, Texas-based Featherlite Building Products Corp. Tradewind Technologies Inc.,
which makes evaporative coolers, is based in Phoenix.
Northland Publishing Co. is a book publishing subsidiary in Flagstaff, Ariz.
Insuring such a mix of businesses means keeping things as simple as possible. One property/casualty
program covers all locations, with the exception of some specialty coverages that aren't needed by all the
operations. Publishers liability insurance, for example, is purchased for Northland, while the coverage would
be of little use for a brick-making subsidiary.
Otherwise, Justin's property/casualty primary and excess program "covers everybody," Mr. Green
explained. "And I think that's helpful; it spreads the risk for the carrier a little bit, and I don't think there's any
question it helps my companies. If they were to try and buy stand-alone coverages, there's no question in
my mind that it would cost more."
Mr. Green buys the insurance for all operations, then "resells" the coverage to the subsidiaries through an
allocation program. He explained Justin's insurance arrangement with the operating companies as an
"incurred-loss retro-type plan." The companies are charged a minimum premium, and "that's all they have
to pay if they have no losses," Mr. Green said. "At the end of the year, they may get a very sizable return,
hundreds of thousands of dollars in some cases."
Justin assumes a $250,000 deductible on all casualty losses. "That's your working layer of claims," Mr.
Green noted. "We very, very rarely get beyond that." The St. Paul Cos. Inc. writes a $1 million layer above
that deductible and a "substantial umbrella" sits on top of that coverage. Fireman's Fund Insurance Co.
writes a $10 million layer of the umbrella, and TIG Insurance Co. writes $40 million in coverage above that.
Great American Insurance Co. and St. Paul unit Athena Assurance Co. write Justin's directors and officers
liability coverage to limits of $25 million. Mr. Green said Justin currently doesn't buy employment practices
liability insurance but eventually might as insurers are improving coverage terms and pricing. "We are
giving that consideration," he said.
Even without the coverage, Mr. Green is making sure Justin reduces the risk of employment practices
claims. "You need to do the things that reduce the possibility of litigation, obviously," he explained, which
means having "good policies and procedures in place that spell out the authority of supervisors and
managers in handling their employees-hiring, disciplining and terminating employees."
A good training program and system of communicating those procedures to managers is needed, along
with a strong employee education effort, Mr. Green said. "Better-informed employees obviously are less
likely to be ones to cause problems for you." Employment practices liability is a tricky exposure, he said.
Like product liability, "it's a moving target. What's expected of you today may not be enough tomorrow
because of some court case somewhere." To stay on top of that exposure, Mr. Green attends at least two
employment law seminars each year, subscribes to newsletters that cover the topic and uses the Internet to
research employment law issues. That effort is necessary, he said, because "it's fertile ground out there for
the plaintiffs' lawyers."
Most of Justin's primary property/casualty coverages are placed by El Paso, Texas-based Rogers & Belding
Insurance Agency Inc. The Brants Co., a Fort Worth, Texas, broker, places D&O, excess layers and
specialty coverages. Justin's workers comp program is a large-deductible plan, with St. Paul writing
statutory limits excess of a $250,000 deductible.
At times, Mr. Green has worked with brokers and insurers to develop specialty coverages. Before Justin
sold a subsidiary that made ceramic cooling towers, Mr. Green realized a need for a coverage that would
pay to retrofit the units if they failed to meet contracted performance standards. Cooling towers are used in
a variety of settings, from office buildings to nuclear power plants, to cool air with circulated water. American
International Group Inc. developed an insurance product specifically for that risk. "It didn't have the word
'warranty' in it, but it pretty much was," Mr. Green noted.
Justin bought the coverage for five years and collected about $5 million on one claim to retrofit a tower at a
Utah nuclear power plant. Considering the amount o f premium paid for the coverage and the cost of the
repairs, Justin realized about a $2 million savings, Mr. Green said.
On the property side, Wausau Insurance Cos. has written Justin's coverages for the past three years. The
highly protected risk program includes a $25,000 deductible. "It's a blanket policy covering all our
locations," Mr. Green said. Justin's operations span eight states, with around 100 manufacturing, sales and
distribution facilities. The properties are valued at about $330 million.
Mr. Green pointed out that the company's insurers not only write coverage but also serve as a resource to
help make Justin's operations safer. Wausau, for example, sends representatives to Justin's 35
manufacturing facilities once a year. "They do a report that comes to me. We keep those on file and send
them out to the locations from here." The reports often contain recommendations intended to improve
safety and reduce losses. "We get some feedback from our managers on getting those recommendations
implemented," Mr. Green said.
"We do the same thing with our casualty lines," he added. The casualty insurers' representatives usually
visit the plants twice a year to do a "safety walk-through," meet with plant managers and participate in
safety training programs.
Mr. Green's work to protect Justin's assets has impressed his boss. "His knowledge of the insurance
industry and the insurance markets could be his biggest strength," said Richard J. Savitz, Justin Industries'
chief financial officer and the man to whom Mr. Green reports. "He's always on top of everything that's
going on." Mr. Savitz said his risk manager "needs little or no supervision. I trust he is constantly working
on ways to do his job better, to protect the company."
Copyright Crain Communications Inc. Reproduced with permission of the Publisher.