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When John J. Carney says National Freight Industries Inc.'s insurance program is "complex," he may be guilty of understatement.

The Vineland, N.J.-based holding company's property/casualty program covers four operating units that perform various functions throughout the 48 contiguous states.

Mr. Carney points out that the operating units are in various states of growth and profitability and require coverages that run the gamut. In addition, National Freight Industries has to comply with the workers compensation requirements of numerous states. In all, National Freight Industries has 14 types of property/casualty coverage underwritten by 11 insurers, with an annual premium of about $4 million.

The centerpiece of the program is the U.S. Department of Transportation's qualified self-insured liability program for National Freight Inc., NFI's Waxahatchie, Texas-based trucking unit.

Under the program, which was initially approved by the now-defunct Interstate Commerce Commission, National Freight can self-insure up to $1 million, though the company recently chose to reduce its retention to $500,000 because of favorable market conditions, said Mr. Carney (see related story).

The first $500,000 over the retained amount is underwritten by Fireman's Fund Insurance Co. Excess umbrella liability is underwritten by American International Group Inc.'s Insurance Co. of Pennsylvania unit, with American National Fire Insurance Co. underwriting an additional layer of excess liability.

National Freight totally self-insures the physical damage exposure for its truck fleet.

Fireman's Fund also underwrites cargo legal liability insurance for NFI and its affiliate, National Distribution Centers L.P., with a $50,000 retention and limits of $1 million.

National Distribution Centers, a multistate public and contract warehousing company, carries its own first-dollar automobile liability coverage underwritten by United States Fidelity & Guaranty Co.

Vineland Construction Co., National Freight's multistate real estate company, carries its own general liability coverage with a $50,000 deductible and limits of $1 million underwritten by Fireman's Fund.

VCC's total insurable property values currently exceed $175 million, said Mr. Carney. Arkwright Mutual Insurance Co. underwrites VCC's property insurance program, which has a $25,000 per occurrence retention.

Other coverages include crime coverage underwritten by a unit of Wausau Insurance Cos. with a $15,000 deductible and limits of $1 million. It also purchases liability coverage for the truck fleet of National Freight Industries' new NFI Interactive Logistics unit. The fleet is insured with a $5,000 per occurrence deductible and $1 million in limits by Reliance Insurance Co.

NFI's workers compensation program is "even more complicated" than its basic property/casualty program, said Mr. Carney.

Employees outside of New Jersey, Ohio and Texas are covered by a large-deductible plan underwritten by American International Group Inc., said Mr. Carney.

Workers in Ohio are covered by that state's monopolistic plan. New Jersey drivers are covered under a program underwritten by a unit of New Jersey Manufacturers Group. In Texas, in practice the only state to allow employers to opt out of the workers comp system, NFI chose to withdraw and to cover its exposure with occupational accident insurance underwritten by CIGNA Corp., Mr. Carney said.

The company also purchased an excess employers' indemnity policy underwritten by Reliance National Insurance Co. to cover its Texas exposure, he said. Although NFI saved close to $1 million during the first year it operated outside the system, the company may rejoin the workers comp system in Texas, said Mr. Carney.

"At the time, that's where we should have been," he said. But "the downside is that once you're out of the workers compensation system, you don't have the protections," such as workers comp being the exclusive remedy rather than tort law, Mr. Carney said. An increase in workers comp-related lawsuits plus favorable changes in the marketplace have led National Freight Industries to consider returning to the system this year.

Mr. Carney said National Freight Industries requires that every injury, no matter how slight, be reported. The company has a workers comp supervisor who speaks directly to doctors and clinics about treatment, and the company will, if deemed necessary, use surveillance of claimants to detect fraud.

"Our philosophy is this: If you work for us and you're injured, we should and we will take care of you. But if we feel that your injury is either embellished or an out-and-out fraud, we're going to be very aggressive in our investigation of it," Mr. Carney said.

As a result, while the frequency of workers comp claims has generally-though not always-increased since 1990, the severity of claims has dropped almost steadily. The average cost per claim during the period Oct. 1, 1990 to Sept. 30, 1991, for claims from all jurisdictions except New Jersey and Texas was $16,946. During the same period, beginning Oct. 1, 1994 to Oct. 1, 1995, the average cost per claim had dropped to $7,638.

Mr. Carney said most of NFI's coverages renew in October, with some scattered throughout the rest of the year, notably in January and February.

National Commercial Insurance Services of Chagrin Falls, Ohio, acts as a consultant and broker for NFI. Although National Freight Industries occasionally uses some outside brokers, all proposals are initially handled by Thomas Lucci, a principal with NCIS.

Mr. Carney said he has no qualms about shopping the market, even though he does not often switch insurers.

"There are those who will tell you you shouldn't shop the market, that you'll make the insurance companies shy away. But for us, it's worked. We shop the market, but we don't move a lot," he said.

Doing so "gives us an idea to see what's available, particularly in the area of financing," Mr. Carney said.

He said shopping the market also allows insurance companies to come in and see how the company operates. As a result, at least one insurer "got a good look at us and liked what they saw and came back the next year with a more aggressive bid," he said.

Mr. Carney said NFI has found extended-year coverage effective when it's available. "We know where we are for the next three years," he said