How to Underwrite Mining Risks and Highly Specialized Processes
What is a Strip Mining Operation?
Strip mining involves the removal of overburden (rock and soil) from large areas of land to reach the mineral to be mined, usually coal, but possibly other materials such as limestone and copper. This method of mining is used when the mineral is relatively close to the surface of the ground. When strip mining is not economically feasible other methods such as underground mining are used. Essentially, all strip mines operate based on the same principle regardless of what is being mined, with the variables being land contour, depth of overburden, and size and type of equipment used.
Overburden is removed with the use of drag-lines, large power shovels, bulldozers, and excavators. Often explosive charges will be necessary to loosen overburden and underlying minerals. Blast hole drillers are used to drill into the surface so explosives can be placed. Depending on the size of the area to be mined the power shovels and drag-lines can be of tremendous size and capacity with values in the tens of millions of dollars.
Removal of the overburden for an above ground coal mine exposes the coal vein (or, " seam"), which is usually drilled and blasted, or augers are used to break the coal from the seam. Loaders or shovels are used to fill the coal haulers, which remove the coal to a processing and/or rail loading facility, which is usually at the mine site.
How to Underwrite a Strip Mining Operation
Strip mining perils include:
1. Landslide: Strip mining is frequently done on hilly terrain. Operations may involve the creation of steep banks of loose overburden (rock and soil), causing landslides to occur. Equipment should only be operated in areas where ground conditions create a safe and steady base.
2. Cave-in and subsidence: Strip operations may be done over old underground mines. Over time settling occurs creating the potential for collapse to the underground mine below. Care should be taken to investigate this possibility prior to commencement of operations. An underwriter might want to have a site inspection performed prior to quoting a risk such as this to qualify such exposure.
3. Explosion: Improper handling, placement, and excessive use of explosives creates the possibility of damage to equipment. Premature explosions can damage transporting equipment and any nearby equipment while improper placement and using more explosives than needed can cause landslides and project larger amounts of debris than planned for in a given area causing widespread damage. Other types of explosion hazards can occur in a coal mining operation where coal dust is created during processing operations can result in explosions at on-site coal "prep plants."
4. Sabotage and vandalism: A frequent concern in the coal fields is labor - management relations. The underwriter should be mindful of impending strikes, job actions, past difficulties from employees or unknowns vandalizing equipment, or local conflicts based on labor differences (union; non-union). Operations with these type of issues should be looked at very carefully.
Other Special Types of Mining Operations
Land Clearing: Involves removal of brush, undergrowth, and trees in preparation for construction. Many of the exposures common to logging operations also affect land clearing operations, particularly fire. Underwriting consideration should be exercised in providing coverage on operations heavily involved in wooded land clearing. Contractors that have exhibited long term favorable loss experience and those that provide adequate private protection and daily maintenance programs should be given due underwriting consideration.
Quarries and sandpits: Landslide, overturn, and flood are the primary causes of losses for this type of operation. Exposures are similar to strip mining. Serious consideration should be given to ordering an engineering inspection on all accounts involved In these operations prior to any quote indications released.
Portable asphalt plants: Are frequently used by street and road contractors to bring asphalt operations to the job site. The plants are often dismantled for transportation to new sites and therefore exposed to overturn and collision perils during transit. In addition, fire and explosion losses occur when the plant is improperly assembled or maintained causing breakage to fuel lines or malfunctions in pumps, motors, and valves. An engineering inspection is always a good idea when underwriting this type of exposure.
Waterborne or Underwater Operations
The problem with waterborne operations begins with the barge or vessel. Beyond that are the additional hazards related to use, the worst of which is overturn or capsizing of the barge. Although barges or vessels on which the equipment is mounted can be surveyed and underwritten for seaworthiness, the operational exposures can change from job to job and even during a single operation.
Cranes on barges can present the most severe exposure. Since few barges are designed with crane use in mind, if a load is extended outboard of the barge and beyond its center of gravity, the barge will "turn turtle," spilling everything "into the drink" including the crane. Accordingly, all such risks should be engineered and inspected and analyzed prior to underwriting and on a per job basis, if possible.
Generally, only larger risks will be Involved in waterborne operations. Bridge builders, pipeline installers, and utility companies, frequently have waterborne exposures in connection with water crossings. If providing waterborne coverage an underwriter might consider participation in a quarterly inspection program.
The specific underwriting concerns for waterborne exposures are listed below:
- Description, age and condition of the barge. If the barge is not owned by the insured the underwriter should know about the maintenance and repair program of the barge owner.
- The manner in which the equipment is to be secured when aboard. Equipment should be secured to the barge frame rather than to deck plates by cables and the wheels or tracks chocked.
- Prevention of barge overturn by: A) Proper loading and unloading, and load placement technique under competent supervision and B) Pre-determination of maximum load lifting capacity of equipment while afloat and strict adherence to this limit by operating personnel.
- Flood exposures.
- Fire exposure and the availability and accessibility of firefighting equipment.