1. Computer Fraud and Fraud in Funds Transfer Willie Sutton was once asked why he robbed banks, he responded “I rob banks because that’s where the money is”. With millions of dollars moving in & out of Petroleum Distributor bank accounts each week, Compromised Banking Credentials has rapidly emerged as a constant threat to Petroleum Marketers.
Example: This scam was created in the Soviet Empire. It begins when a Petroleum Marketer employee downloads malware onto a company computer. The malware “keystroke logging” can then steal sensitive banking and payroll information. They then employ “Mules” to place fake online job advertisements. These perps are then added onto the payroll. According to the FBI these cell criminals have stolen millions of dollars from US businesses accounts.
2. Trade Credit Risk. I once heard a client say to me, “I don’t want my man to have to choose between feeding his family or paying his oil bills.” Wholesale Petroleum Marketing requires dealers to extend credit. Although most marketers require their dealers provide financial guarantees such as cash deposits, letters credit or collateral, the severity of defaults is increasing.
How would a single AR (Accounts Receivable) write-off in the $50-$100K range impact your company’s bottom line? Each load is equivalent to $26,700 in AR, assuming that it costs $3 per gallon for a standard 8,900-gallon load. A dealer could sell 3 loads for $80.100. A marketer would need 1,602,000 additional gallons to compensate for a $80,100 credit loss. AR Insurance is an affordable option if your lender isn’t happy with your current AR levels or if your business is looking to grow without taking on additional credit risk. It is a great option to outsource credit and insure it.
3. Pollution Liability Prior to the mid 1980s, coverage for pollution liability was included on General Liability policies. After the 1976 and 1980 (CERCLA and RCRA) acts, insurance carriers began to exclude pollution coverage from Property, General Liability and Auto Liability policies. Although some coverage can be endorsed back into Auto, GL, and Property policies, the Petroleum Marketers of today still have significant uncovered environmental risks and perils that would require an Environmental Impairment Policy.
While all Petroleum Marketers are exposed to varying degrees of pollution liability, operations with elevated levels of risk would include those with ASTs, Contractual Obligations from Leased Property, Contracting Operations such as Tank Installation or Repair, those Acquiring Property, Leased & Loaned Tanks, Recyclers, Automotive Service & Repair, HVAC Operations, Property Managers, and Transportation. Even emissions from HVAC, Cooking, or Soft Drink equipment can lead to pollution liabilities. ALL PETROLEUM MARKKETERS HAVE POLLUTION LIABILITY.
Many environmental coverage options available today are very attractive in terms of cost and coverage.
4. Cyber Liability Cyber Liability can be defined as Privacy Liability (personally identifiable data of customers or employees), Security Liability (“failure of prevent spread of hack attack), First Party cyber Extortion (“expenses required to respond to threat and ransom), First Party Privacy Breach Expense (“customer notification), credit monitoring expense, computer forensic expense, first party business interruption expense, regulatory defense and penalty). Cyber Liability includes Libel, Slander and other forms of Disparagement that relate to your website. Copyright infringements of material on your site are also included.
Cyber liability is not covered by standard general liability policies. Therefore, it is important to consider purchasing Cyber Liability coverage. Examples of cyber liability include: Credit card data of customers hacked from a marketer’s ecommerce site, stolen HR file which contained 250 employee SS#’s. Your website transmits a virus message to a customer. A rogue employee steals copyrights or trademarks from a prior employer and inserts onto the site. Data stolen from laptop. Breach of non-disclosure.
5. Marketers with L.P. Gas Exposure: Tightening of the Underwriting Guidelines Now, more than ever, the risk takers, or insurance carriers, want to verify that the following NFPA 58 guidelines are being followed: CETP Certified Employees, Annual Duty to Notify, Gas Checks on 100% of customers, and a written procedure for completing Pressure checks on EVERY Out-of-Gas call. It may be harder to get replacement coverage for LP Gas marketers who do not follow these risk management guidelines. Because of the high volatility of their product, LP Gas dealers are held to a higher standard by the courts of law. The non-compliance to these NFPA 58 standards has caused insurance carriers to stop renewing their coverage.
ACTION PLAN: It’s advisable that you complete a thorough risk assessment with a competent broker who understands the petroleum marketer & convenience store industry.
