TASB Risk Management Fund
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How Active Loss Prevention Can Save You Money

September 13, 2017 Charles Hueter

safety checklist with stars

When funding is tight and budgets are under scrutiny, it can be tempting to cut corners wherever possible. This is especially true when educational quality and jobs are on the line. However, it is important to keep in mind that a short-term gain can result in long-term pain.

The obvious and the not-so-obvious

No one wants to see an employee injured. One slip and suddenly your district is paying thousands of critical dollars. Claims costs are probably at the top of your mind when you think “safety.” However, those losses are just the beginning.

Studies have shown for every dollar of direct, insurable losses there are at least five dollars of uninsured losses to go with it. Time is money and time spent on claims investigation, reporting, and paperwork is not cheap. A temporary substitute for an injured person’s knowledge and experience must be found (adding to costs) or adjustments have to be made to move forward without it (adding to delays and dangers). If property is damaged, there are the costs of replacement equipment, hazardous materials exposure, and unusable work spaces. Legal costs are always hovering in the background. We like to refer to this problem as the accident cost iceberg.

It is important to remember that preventing a loss is not just about keeping people safe and your claims numbers low; it is also about the dozens of additional losses that build up while you divert your resources to adjust to the loss. Actions that you can take to prevent one obvious loss save you several times that amount in unobvious losses. An active loss prevention program is the best way to save this money.

Preventative maintenance is not optional maintenance

A modern educational facility is complex. Maintaining a vehicle fleet, floors and ceilings, plumbing, and the whole spectrum of systems needed to provide a safe and comfortable environment is time-consuming and expensive. Preventative maintenance, however, is often considered a budget item worth cutting. Here is why that is a bad idea.

Equipment has an expected service life and should be purchased with that in mind. The manufacturer estimates that service life based on proper maintenance and may not honor a warranty if that maintenance is not performed. Not greasing a bearing surface may save a bit on materials and labor costs here and there, but do those savings stack up to the cost of a whole replacement system if it fails? 

Preventative maintenance may identify problems that, if left unchecked, could lead to serious losses of systems and equipment. Another consideration is that system failures may not be covered by insurance. The resulting damage may be covered, but there may be exclusions that limit or deny coverage, leaving you holding the bag for those costs. Preventative maintenance may identify problems that, if left unchecked, could lead to serious losses of systems and equipment.

The loss of failed equipment is not limited to that equipment. It can result in damage to other property and harming people. Cracked and loose electrical outlets increase the chance of a fire and can short-circuit other tools and equipment. A poorly maintained water heater can leak, leading to an indoor air quality nightmare. And there is no doubting the value of regular oil changes for your vehicles!

Water boilers in particular are tricky because they combine so many sources of energy. Water, pressure, heat, electricity, and even flammable gas exist in a balance that, when disturbed, can lead to a serious accident and extensive property damage.

Here are some general tips to help maintain boilers:

  • Test the functioning of all boiler controls, including drains and blow-offs.
  • Check the fuel system for leaks and ensure all fuel filters and strainers are replaced regularly.
  • Ensure all shut-off valves are leak-tight.
  • Ensure the water-pressure regulator and recirculation pump work as required.
  • Confirm there are no signs of overheating, corrosion, or erosion.
  • Have any cracked surfaces repaired by a qualified repair company immediately.

Other cost-cutting measures can contribute to a catastrophe. When school closes due to winter storms, indoor temperatures may not need to be kept at normal levels, but they need to be above 40 degrees to prevent pipes from freezing. These kinds of precautions also apply to temporary facility closures due to budget cuts. You should plan to maintain these facilities to ensure that problems do not escalate into major issues. Preventative maintenance, such as checking roofs for debris and leaks, can avoid expensive ceiling damage that may put a huge dent in your finances. Keep these things in mind if you decide to change established procedures in order to save money. Those procedures may be in place for a reason.

If you have questions about building a loss prevention program or keeping it active, please contact your risk solutions consultant.

Editor's note: This article was originally published in March 2011 and has been updated for accuracy and comprehensiveness.

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