Metal casting is an extremely risky type of activity that has many different types of loss exposures. Very briefly, metal casting is a process during which metal is heated in a crucible or a furnace and then poured into a suitable mold, which contains a hollowed cavity of a certain shape, where it sits and solidifies. It has been practiced from the dawn of civilization as a technique that serves a wide variety of needs, such as creating artistic, religious, and practical items. While many individuals engage in metal casting as a form of hobby and an artistic endeavor, a commercial use of metal casting is explored in this paper. Today, commercial metal casting is a highly efficient way to build models and statues, as well as create restoration projects and even small replacement products often needed to assemble simple household items. The principal metals and alloys used in this process are brass, pewter, bronze, copper, lead, iron, aluminum, and stainless steal. The melting point for many of these metals is well above 1,000 degrees Fahrenheit and so it is imperative that anyone who works in this type of business is extremely well trained and cautious. Since metal casting involves working with a molten form of metal, it is undoubtedly an extremely dangerous process which can lead to many losses if not conducted in correct manner and if the persons who are working on it are not properly trained and equipped.
To understand just how many loss exposures a metal casting establishment has, it is important to understand the processes that they must undertake on a daily basis. There are many types of processes involved in metal casting, as seen by a typical flowchart covering internal flow of a company that specializes in this type of business. Most established foundries have eleven processes that they must undergo when creating a final product: pattern/tool making, mold preparation, metal preparation, metal melting, casting, removal of casting, fettling and finishing, heat treatment, plant maintenance, waste disposal, and material handling and packaging. Each process creates many significant hazards and exposures and well-managed and effective guidelines must be practiced to minimize the possible losses. Pattern/tool making is the process of manufacturing the tooling for producing the final component from the metal casting process. Potential exposures in this process are metalworking machinery, hand tools, fumes, dust, and chemical solvents. Mold preparation is a process by which a reverse image of the final component into which molten metal is poured is formed. Materials used for molds oftentimes include sand and wax. Many of the exposures during this process are the same as the ones from the pattern/tool making but also include flame, because it must be used to create the molds. Metal preparation is the third step of metal casting, which involves segregation and preparation of alloys and scrap prior to the melting process. Because many metals have sharp edges this creates a loss exposure. Heavy metal contamination and dust/sparks are other types of exposures. After metals are prepared, they are melted to a controlled temperature and composition. During this process, the workers and building are exposed to explosions, fumes, moisture, and extreme heat and temperature. The fifth step is casting, which, in other words, is transfer of the molten metal into the prepared mold for solidification. This particular step is riddled with exposures. The metal can escape while being transferred, and create many losses. The temperatures of the metals during this process are sufficient to convert some of the quartz in the sand of the mold to cristobalite, which is a significant respiratory hazard. The casting process is followed by the removal of castings. This process is removal of casting from the molding medium in preparation for fettling and finishing. Once the casting has been cooled, it is removed by knocking it away from the mold by hand or using vibrators and pneumatic tools. Significant noise and dust hazards are created by these processes. The cool castings also have sharp edges which pose another type of loss exposure. Some time after the castings have been cooled, they undergo fettling and finishing process, which involves removing excess material from them to meet specified dimensions. This is an area where many exposures exist and an important place to implement proper risk control operations. Among these exposures are abrasive cleaning materials, equipment failure, cutting oils, x-rays, ultra-violet light, stress and mental failure, grinding/cutting machines, dust, housekeeping and many more. After the castings have been fettled and finished they sometimes must partake in heat treatment during which controlled temperatures are used to enhance their metallic structure and physical properties. This process involves heavy use of heat so many safeguards against losses due to heat such as burns, explosions, and fumes must be implemented. Throughout the overall business operation of the metal casting establishment, the plant itself and all the machinery must be well maintained so as to keep it in safe operable condition. Maintaining furnaces, for example, involve replacement of refractory materials, which poses serious health risks. Many precautions must be taken during this process to avoid liability as well as improper maintenance, which can create more exposures to other workers, people on the premises, and the building itself. Waste disposal is a process of removal, segregation, and safe storage and disposal of materials that are unusable. This process exposes the environment to damage and can create a lot of liability problems. Lastly, the process of material handling and packaging, which involves presentation of components for dispatch to meet the customer specifications, creates liability exposure because the final product can be incorrectly packaged or put together.
Ward Elicker Casting, Inc is a business which practices metal casting and operates in Philadelphia. It produces metal sculptures for a wide variety of clients, ranging from both public, such as the city, to private. As a business entity in this line of work, it faces all of the loss exposures mentioned above and must be extremely good at managing risk. Safety training, for example, must inform workers about the obvious precautions like never to look directly into a flame that is extremely high powered, to more specific ones like the fact that when molten metal contacts nonporous surface with water it is likely to explode and splash hot metal everywhere. Some of the most common exposures, in general, that Ward Elicker Casting faces in its operations are related to dust, chemicals, gases, noise, manual handling, and heat. All of these exposures combined make for a very potentially costly mistake in operations.
The first step in risk management process for Ward Elicker Casting is extremely crucial. Identifying all of the possible loss exposures is incredibly difficult simply because there are so many different types of losses that can occur related to any of the operations. To identify these exposures, Ward Elicker Casting primarily conducts thorough personal inspections and inquires for insurance survey questionnaire forms which help identify insurable loss exposures. Another important step in identifying loss exposures is the flowchart analysis, which breaks down the operations into the eleven aforementioned processes and reveals the nature and use of resources involved in each of those processes. When analyzing the exposures, it becomes clear to Ward Elicker Casting that without exceptional safety programs in place the severity and frequency of losses can drive the company out of business incredibly quickly. An active practice of both risk control techniques and risk financing techniques is crucial for its day to day operations. Losses are likely to be catastrophic and very frequent, so a strong combination of inspection, safety programs, and insurance is needed. For a company like Ward Elicker Casting, obtaining insurance with an affordable premium can be virtually impossible if very good risk control techniques are not vigorously practiced.
One of the most important steps that Ward Elicker Casting takes to handle risk is developing effective loss prevention techniques. One example of this is seen in loss exposures created by fumes. The fumes of some of the metals and alloys are very toxic. Extreme inhalation of fumes created by molten metal which contains lead or the lead oxide dust in the dross can result in lead poisoning. To ensure that loss exposures imposed by fumes are minimized, Ward Elicker Casting has a well-maintained exhaust ventilation system which makes sure that the air change rate is adequate. Some other examples of loss prevention are making sure that there is always a presence of light, both natural and artificial, so that workers can perform their task without a visual impairment. The ledges and beams inside of the building must be clean at all times so that there is no settling of dust which can lead to explosions or excessive inhalation. Perhaps the most important part of a successful loss prevention technique is a good training program that enables all employees to understand the dangers that surround them and help them make sure all of the loss exposures are in mind while working. At Ward Elicker Casting all new employees must undergo safety training programs and pass a loss prevention test which shows that they understand all of the hazards and can perform their tasks cautiously. All of the current employees must participate in routine safety testing so that their understanding of risk does not decline with time. A continuous premises inspection is conducted to make sure that all of the machinery, equipment, safety gear, and internal structures are in good shape. Besides these, there are many other different types of techniques that are practiced to reduce the frequency of losses. It is important to note that loss prevention is the most important thing that Ward Elicker Casting can do to handle risk as it makes sure that frequency of losses, which can be very high in this type of business, is significantly reduced and allows for an affordable premium from an insurer. Although they can be expensive to implement and maintain, loss reduction programs are what make this highly dangerous line of work possible to insure.
Another type of risk control technique that is practiced by Ward Elicker Casting is loss reduction programs which aim to reduce the severity of losses if they do occur. One example of an implementation of this program is, once again, safety training instructions, which allow all workers to know what to do once some sort of accident occurs. The interior premises have a fire extinguisher on almost every wall and a working sprinkler system, both of which can significantly reduce the amount of damage if fire escapes from the furnace or if liquid metal accidentally escapes while being transferred into a mold. The walls inside the operating facility also contain detailed instructions of necessary steps that must be taken in order to contain the damage if an accident occurs. One interesting aspect of Ward Elicker Casting's loss reduction program is the fact that it has a very well implemented contingency plan. This disaster plan formally identifies any possible crises that can occur and states a detailed, formal response plan. For Ward Elicker Casting, disaster planning is very important because it addresses the risks associated with those processes without which an entire organization cannot function. An example of this is a detailed guide of what to do if the furnace has a complete mechanical breakdown. An obvious part of disaster planning is contacting an insurance company. Without a good disaster plan in place, insurance premium can go up by a very big dollar amount.
Now that we have looked at some of the risk control steps we have to look at another very important aspect of risk management: risk financing. When both of the above risk control techniques are implemented, a metal casting business like Ward Elicker Casting still has many loss exposures, but the difference is that now they are no longer economically feasible for an insurer to insure. A quick glance at the company earnings tells us that this particular metal goods manufacturing shop is small and has a very unique need of coverage. Because there are so many loss exposures, a special type of policy must be provided that offers coverage for these exposures. Ward Elicker Casting is insured by The Hartford through brokerage services at VanDyne Insurance Agency. It is covered under Causes of Loss - Special Form.
The major loss exposure that a metal casting manufacturer needs insurance coverage for is surprisingly one which is not incurred during any of the eleven aforementioned processes. This loss exposure is theft. The price of certain metals has sky-rocketed in the recent past, and is projected to increase in the future, enticing many thieves to steal metal and sell it for scrap, which means that a company like Ward Elicker Casting is especially vulnerable to attract such thieves. Copper, for instance, was sold for just 75 cents a pound just five years ago; today it is worth more than $3.70, mainly because of increased demand from countries like China and India. Even though metal goods manufacturers practice exceptional loss prevention techniques and make sure their property is secured and properly locked at night, theft is still very likely to occur. Ward Elicker Casting is covered against theft of metals and finished molds by their special form insurance and features a limit of up to the BPP limit. Any theft and extra expense that is incurred because of it is covered up to that limit. This insurance coverage came especially useful last year when theft actually occurred to Ward Elicker Casting and a good amount of copper and various other metals was found missing one morning. The Hartford paid out approximately $27,000 to reimburse the loss. In addition to theft, the manufacturer's stretch also reveals that Ward Elicker is protected against employee dishonesty with a limit of $10,000.
Another major loss exposure for which risk financing is needed is damage related to fire, heat, and steam. Ward Elicker Casting has coverage for their building with a replacement cost as a method of reimbursement and a limit of $3,438,000. The special form also provides an endorsement for a limited fungi, bacteria, and virus coverage with a limit of $50,000 which is important because metal goods manufacturers work in environments which are chronically subject to moisture, vapor, and high levels of humidity. Given adequate moisture, mold spores secrete enzymes that digest cellulose-based materials such as the ones found in paint, insulation, most furnishings, and other items. Ward Elicker Casting's special form also provides an endorsement for mechanical breakdown of equipment, as well as artificially generated current and steam explosion. In addition to these endorsements, there is also an endorsement for cleanup of hazardous substances with a limit of $50,000 which is also very important to metal manufacturers which are exposed to such hazards daily.
Metal goods manufacturers can also incur a variety of liability related to their operations and need good liability coverage from their insurers. The Hartford provides business liability coverage to Ward Elicker Casting. Liability and medical expenses has limits of insurance of $1,000,000 and personal and advertising injury also has a limit of $1,000,000. The general aggregate limit is $2,000,000. One thing that is interesting about liability exposures that Ward Elicker Casting faces is that if they create a metal statue and ship it to their client and it falls because it was constructed improperly then Ward Elicker Casting is held liable and their insurance would pay out all of the claims up to the limits. Also, people that visit the premises and are not employed by Ward Elicker Casting are exposed to a variety of health hazards. Their limit for medical expenses to any one person is $10,000.
Once products are finished, they need to be shipped to their respective clients, which creates another liability exposure. Ward Elicker Casting has an endorsement added to their business liability exposure which provides liability coverage for hired/non-owned autos. If any liability would be incurred while metal goods are in transit and the metal manufacturer is found to be responsible for the losses associated with that liability then Ward Elicker Casting's insurer would pay out the claims for up to $1,000,000.
Last major exposure that Ward Elicker Casting faces is losses due to worker's compensation. Employees in the field of metal molding and casting are exposed to a wide variety of hazards discussed earlier. While good risk prevention and reduction techniques can contain the losses incurred by employees getting injured, they are not completely eliminated nonetheless. Just like any employer, Ward Elicker Casting is obligated by law to offer worker's compensation benefits. They purchase their coverage through state funds and not through The Hartford.
All in all, Ward Elicker Casting faces an array of risk exposures, many of which are incurred during the process of product creation. Other loss exposures like theft also play an important role in risk-financing decisions. A good combination of risk control and risk financing is needed to keep the level of risk under control and ensure that business operations are not disrupted. With prices and demand of metals on the rise, taking thorough steps to handle risk is, likewise, becoming a very important decision-making tool for metal good manufacturers.
