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PSM HELPS FIGHT AGAINST LOSSES FROM HUMAN ERROR

Posted On: Aug. 16, 1998 12:00 AM CST

To err is human -- and expensive.

But a holistic management approach aimed at keeping mistakes from creeping into loss control systems is growing in popularity among risk managers, enabling them to prevent both property loss and employee harm.

According to figures from Waltham, Mass.-based Arkwright Mutual Insurance Co., 70% of customer losses result from human errors or lapses in judgment, and the Factory Mutual system reports that contractors' mistakes directly or indirectly caused $600 million in damage since 1990.

Companies can help protect themselves against costly errors by adopting the process safety management approach, which involves systematically and continually evaluating the interaction between manpower and machinery.

From checking the mechanical integrity of the equipment to ensuring that workers are trained appropriately, PSM arms corporations with a holistic way to examine their loss control programs.

The thoroughness of PSM lets companies "hold the whole (loss control) plan up to the light and look for weak spots," said Dennis Anderson, vp and director of engineering for Protection Mutual Insurance Co. of Park Ridge, Ill.

PSM also aims to remove employee fears about the machinery or other hazards he or she works near daily. Intimidated or poorly trained workers are not likely to recognize a malfunction when it occurs or will act improperly -- a reaction that could have disastrous consequences, insurers and consultants say.

"People need to understand what could go wrong and how to deal with those situations. We recommend automatic equipment, but one has to keep in mind the human element," said Michael Morganti, customer education specialist at Arkwright. Mr. Morganti noted that many line workers may feel a false sense of security that the sophisticated machinery doesn't need human interaction. "I think that may be a dangerous assumption," he said.

Donald Lorenzo, senior technical director with JBF Associates Inc., a Knoxville, Tenn.-based risk assessment consulting firm, compares certain workplace operations to someone riding a unicycle: While it can be done safely under the right conditions, it puts the person in a precarious position.

"What is often blamed on human error is often a booby trap waiting for a human to fall into," Mr. Lorenzo said. "It's the same in our plant system. What is blamed on human error isn't always carelessness," he said, noting that it is easy to lay the blame on the worker rather than on management's lack of foresight in assessing the risk in a situation.

Although PSM is mandated by the Occupational Safety and Health Administration for the chemical industry, other industries increasingly are adopting the approach.

While the 1992 OSHA standard -- called "Process Safety Management of Highly Hazardous Chemicals: Explosives and Blasting Agents" -- was developed to protect workers, it also serves as a checklist to safeguard property against loss.

"Chemicals clearly pose threats of many sorts," said Charles Morgan, an independent risk management consultant based in Summit, N.J. But many facets of PSM are designed to reduce human error, he said, because "human error is probably more likely" than a mechanical problem. Mr. Morgan has done presentations on process safety management in conjunction with OSHA for the Malvern, Pa.-based CPCU Society.

The Budd Co. is among those that practice the PSM approach. To ensure workers are able to recognize early signs of malfunction, Lou Drapeau, manager of risk management for the Troy, Mich.-based automobile parts supplier has employees work closely with engineers to devise ways to make the equipment safer.

In one instance where safety standards differed between an exporting European country and the United States, The Budd Co. used employee suggestions to modify a new device called a recooperator, which is used for melting metal in a foundry. "Our employees are always looking at new technology to help them do their jobs better," Mr. Drapeau said. "We can't afford not to know how to fix this stuff. By the time we're up and running (with the new equipment), it's almost second nature (to the employees)," he said, noting that the process to modify the recooperators has already taken 18 months and is ongoing.

A series of malfunctions over the past several decades that released toxins and flammable substances into the environment sparked interest in PSM globally. Some of these accidents were fatal, and many of them caused large property losses.

Two of the most notable disasters: In Flixborough, England, in the 1970s, a toxic chemical vapor cloud was released from a chemical distribution plant; and in Bhopal, India, in 1984, some 2,000 people died from the chemical release of methyl isocyanate, which is used in the production of pesticides.

During the late 1980s and early '90s, when industrial plants in the United States began to have similar chemical release incidents, OSHA imposed its mandate.

The mandates include instructions on training the workforce, managing contract workers, evaluating the mechanical integrity of machinery and an explanation of a concept called "management of change," which encompasses both how to bring new people into the system and how to adapt to mechanical changes.

"It's an example of industry and government working together to get a good result overall," said Arkwright's Carmen D'Angelo, vp-chemical and pharmaceutical group. "If people follow the PSM method, all of these (safety and loss concerns) are addressed."

John Sharland, special chemical risk program coordinator with Factory Mutual in Norwood, Mass., said: "You can make a direct correlation with the Flixborough loss. If the management of change element of a PSM program had been in place, then the management of change could have directly prevented the loss."

In Flixborough, the plant used a cascading reactor system, Mr. Sharland said, which involved one reactor flowing downward into the next one in series. One of the reactors developed a crack in its steel wall and was removed. To keep the plant operational, the plant staff devised a new style of reactor that included metal bellows that expanded and contracted. Because of the introduction of movement into a system that wasn't designed to flex, the pipe dislodged and allowed the chemical mixture to spill.

Today's OSHA mandate requires that unless a part is being replaced by an identical component, management must evaluate the entire system to ensure that introducing a change of machinery won't disrupt the security of the existing system, Mr. Sharland said.

Mechanical integrity and maintaining an orderly workplace also factor into the overall safety regimen outlined through process safety management.

"If you mix bad housekeeping with poor hot work procedures around critical equipment with the (fire) sprinklers turned off, it's a formula for disaster," Mr. Anderson said.

Many companies outsource "hot work," such as welding, and other activities, such as plumbing, that could require the sprinkler systems to be temporarily disabled.

To manage contractors, Mr. Anderson recommends interviewing them extensively to establish expertise and an interest in safe practices and then logistically examining how the job will be done. Finally, he urges companies not

to allow contractors to "operate untethered," but rather have a full-time employee constantly check the contractor's caliber of work.

Thomas M. Suehr, a specialist in highly protected risks at Wausau, Wis.-based Wausau Insurance Co., agrees. "I think that it's a safeguard for risk managers to have (a set of rules) by which outside contractors are expected to conform."

Arkwright's Mr. Morganti said that because contractors are paid per job, many do not have the same loyalty and drive to do quality work that full-time employees are likely to have.

"You don't have loyalty. When you outsource, you lose experience (about workplace hazards)," he said. "If (contractors) burn your building down, they still have a job and you don't."

Mr. Morganti emphasizes that the real task is to instill in every employee, temporary or full-time, that "property loss control is in their job description."

"In the insurance industry, we are constantly identifying causes of losses post-mortem," said Scott Settje, vp and engineering manager of Waltham, Mass.-based ALM Services, a joint venture between Arkwright and Boston-based Liberty Mutual Insurance Group that provides underwriting and loss prevention advice in the property sector. "In PSM, you want to be proactive."

Factory Mutual's Mr. Sharland said part of being proactive means examining accidents and near- misses and incorporating education on preventing the mistakes into the PSM training. He even urges advertising the problem in-house as a way to alert workers to lurking dangers.

At Pittsburgh-based Bayer Corp., Risk Manager Charles Galba said workers were able to learn from past mistakes. Although Bayer is best known for pharmaceutical products, it also manufactures chemicals, such as inorganic colored dyes used in paper and clothing.

In October 1997, at the dye-making factory in Bushy Park, S.C., near Charleston, an operator was severely injured when a vessel exploded. Mr. Galba said the sprinkler system activated and held the fire at bay, but one production line was lost.

While Bayer is still not certain about the cause of the incident, the vessel was rebuilt using a more safety-oriented design, Mr. Galba said. "Our loss history has really been excellent," he added.

Companies under OSHA's process safety management mandate discover that the best defense against a citation is a good offense. And while a company's PSM evaluations are proactive measures, OSHA's inspections are generally reactive, based on accident investigations or employee complaints, said Mike Marshall, Washington-based program coordinator for OSHA's process safety services.

"It's the employer's obligation that he complies," he said, noting that PSM inspections are resource-intensive and time-consuming. "It's a real commitment for us to do scheduled inspections."

When OSHA inspects for PSM-related issues only, about 95% of the inspections result in citations, Mr. Marshall said. OSHA frequently visits refineries, petrochemical companies and food processing facilities. During a recent year, the largest number of citations were issued in SIC Code 28, which covers the chemical industry.

A complete PSM program not only can keep corporations from incurring losses and committing safety violations, but it also provides the companies with quality and productivity measures, JBF's Mr. Lorenzo said.

"The good of these programs is we involve accidents and losses," Mr. Lorenzo said. "Businesses find it makes bottom-line economic sense."

Arkwright's Mr. Morganti agrees. "Having a loss and not being able to address a customer's needs is one of the worst things that can happen in this global market."

Having a PSM program in place also can make a corporation's risk more attractive to insurers, said Warren Meigs, assistant vp of chemicals and refining for Hartford Steam Boiler Inspection & Insurance Co.'s energy division. "It makes a big difference in selecting a risk," he said.

Mr. Meigs, based in Hartford, Conn., is especially impressed by companies that implement PSM programs even though they are not required by OSHA to do so. "It can have an effect on our underwriting procedures," he said.

Pharmaceutical company Eli Lilly & Co. promotes its process safety management commitment on the corporation's World Wide Web site.

Brad Arthur, manager of corporate occupational health and safety for Indianapolis-based Lilly, said when the company calculates the cost of recovering from a major disaster -- including replacing equipment, loss of productivity and human suffering -- PSM makes sense.

"It's very easy to justify putting resources, both dollars and people, into PSM," he said. "It's greatly to our advantage that we protect our workers, our environment and our neighbors. All of the elements of PSM work toward that goal."

Companies that do not currently have a process safety management system in place can begin by contacting a safety consultant or by obtaining materials on PSM from the Center for Chemical Process Safety, a directorate of the American Institute of Chemical Engineers, by calling 212-591-7319, or on the Internet at www.aiche.org/docs/ccps.