Lockton serves several large food processing firms. Processors are facing an extraordinary profit squeeze from rising grain and raw material prices and intense price competition.

A client asked Lockton to review its product recall and contamination insurance program which was handled by another broker. The company’s wanted to maintain price stability.

So Lockton’s global team—with members based in London, Kansas City and Atlanta—conducted an audit of the existing program, held intensive discussions with insurance carriers worldwide and developed a unique approach.

Our client generated big benefits from Lockton's work:

     • Despite the company’s revenue growth, the program was secured with a 14% price
      reduction (“apples to apples” comparison)

     • Secured an program alternative that removed the potential cost of a multi-million dollar
      “large loss surcharge” following a recall

     • Identified and developed new market capacity for product recall to reduce reliance
      on a single carrier

FM Global submitted a recommendation that a fire-alarm system be installed throughout a multi-building, five-acre food-processing site. The system, as required by FM, would have cost the client over $65,000.

Lockton’s involvement was to review the client’s process and the FM recommendation and determine what measures should be taken. After our review of the process, we identified one critical area that housed finished goods. All other areas had minimal fire loading and were wet-vegetable processing.

Lockton negotiated the recommendation with FM to install a single horn system in the finished goods area at a cost of $5,000. FM found the alternative acceptable, and we saved the client $60,000.

We assisted a major food processing and distribution client in establishing a “Best Practices” Safety and Loss Control program utilizing the best of what each of the regions had in place along with our own additions. This client recently made a very large acquisition and it was determined that the average worker’s compensation claim cost of our client was 20+% below that of the acquired company, which equated to several million dollars.

During a furnace repair, asbestos dust was released into our insured’s baking plant. State and Local officials intervened, the plant was closed, and a recall was ordered. As a result, the insured estimated damages to be approximately $5 million dollars for loss of product and production. The carrier denied coverage and refused to make any contribution to the loss.

After attempting to negotiate with the carrier, we conducted our own legal research. With limited assistance from outside counsel, and the client’s corporate attorney, we drafted a strong coverage letter, outlining possible coverage. As a result of our position letter, the carrier made a substantial contribution to the loss and the client was able to recover their losses.

A national food processing company faced challenges with an upcoming plant closing. Prior to Lockton’s involvement, the company experienced a negative financial impact while shutting down a California plant, when 100% of workers filed workers’ compensation claims. Lockton Loss Control developed and implemented a Risk Control Service Plan for the second California closing. Through upfront research of local jurisdiction, unemployment statistics and job placement resources Lockton created a detailed plan. The plan integrated resources from the community, plant management, corporate finance, human resources claims and safety. Before Lockton’s involvement, the client projected that 50% of the plants 560 employees would file claims. By adopting Lockton’s plan, the company announced the shutdown in mid 2006 and only 3 claims have been filed as of October 2007 totaling $31,800. The original projected loss was $3.7 million to $7 million dollars.