In January 2013, a young driver with Madsen Roofing & Waterproofing, Inc. — a commercial roofing contractor licensed in California, Nevada and Oregon — was on a delivery route in northern California and missed his turn. Instead of pulling into the next driveway or intersection to turn around, the 19-year-old attempted a U-turn in traffic and caused a crash that could have jeopardized Madsen’s multi-generational family business.
The 62-year-old passenger in the oncoming car he sideswiped suffered fractured vertebrae and a ruptured disk. He immediately underwent spinal surgery and spent the better part of a year in rehabilitation.
The ensuing lawsuit went to mediation and the parties ultimately settled. But the process of getting there and the aftermath was not easy.
“We knew it was going to be bad. We knew that the nature of the injury was pretty severe,” said Allen Brooks, who brokered the deal. Brooks is senior vice president of Gallagher Construction Services. He has been in the insurance business for nearly 40 years and began specializing in the construction industry in the 1990s.
“There was no question that we were going to have to pay,” he continued. “At that point, it really became about trying to manage the actual claim process.”
At trial, Brooks said they expected a potential jury to award anywhere from $2.5 million to $6 million or more. The claim settled for roughly $2.6 million.
The employee was fired, and although cited by police for being at fault for the crash, Madsen Roofing & Waterproofing was on the hook for any damages.
But the next challenge was moving forward. Both the company’s auto insurer and excess insurer declined to renew, and Madsen had difficult decisions to make about the future of the business.
“It was a question of where could I go next?” he intimated following a presentation at Best of Success. “Was I going to be able to afford the insurance I needed for my company to do the jobs we were accustomed to doing?”
Brooks said that Madsen did have a few important factors in his favor: an impeccable reputation in the community and the industry; and that it was truly an aberration of the company’s record toward safety.
“This was truly a shock loss,” Brooks said. “Underwriters look at dollars and cents, but they also look at sustained revenue that a company like Madsen Roofing & Waterproofing can provide.”
Perhaps the biggest key, both said, was showing potential insurers the proactive measures Madsen implemented right away.
“Probably our biggest mistake in that scenario was having a young individual without a lot of driving experience who made a critical decision the wrong way, obviously,” said Madsen, a former apprentice, journeyman roofer, foreman and construction superintendent. He became the company’s majority shareholder in 2008 and is now the company’s president and chief executive officer.
Since the crash, employees with any prior driving record or those with less than five years of experience are prohibited from driving company vehicles. Each vehicle is equipped with a key fob that tracks and monitors not only their drivers location, but their driving habits. That information is sent in real-time to three company employees at headquarters for evaluation.
“We know if we have a hard-breaking event, quick acceleration, or speeding,” Madsen explained. “It’s all ‘pinged’ so if we see a pattern or problem developing, it’s addressed right then and there.”
Those improvements and a continued emphasis on driving issues during regular meetings and safety trainings made a big difference in the company’s bottom line when it came to insurance. Brooks said he obtained new insurance for Madsen with a relatively minor cost increase of just four percent.
“It’s like gold,” Brooks said. “If you have a good relationship with your insurance broker … the more information you can give them, the better.”