Canadian Underwriter

Dangerous Goods: A Special Risk

July 30, 2013   by Victoria Stirling

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The explosion could be heard a kilometer away and the flames were visible from just as far.  A fuel tanker had struck an overpass.  The morning news report brings the tragedy to life with images of the charred remains of a $200,000 fuel tanker, a bridge that is now unsafe to use and a long line of backed up traffic. Most tragic is the loss of a life.

The severity of such events can be staggering. They also underline the many risks associated with the transportation of dangerous goods such as explosions, fire, pollution, contamination and public health.

Not every insurance company offers coverage for those carriers that transport dangerous goods, whether the quantity of dangerous goods is incidental or the primary business activity.

Every dangerous product is classified relative to the danger it represents and the danger can be heightened due to the quantity transported. There are regulations governing the transportation of dangerous goods in Canada and the US that identify and stipulate the responsibilities of all the parties involved in their shipping, transporting and receipt. They include such elements as placarding requirements, equipment specifications and driver training. Penalties for non-compliance can be severe with fines of up to $100,000 and even imprisonment.

The best in class transportation companies don’t stop when they meet the minimum requirements of the regulations; they go above and beyond and strive to be the best in class.

It’s important for insurance companies and brokers to understand the regulations and recognize those carriers that have exceeded the minimum and are the best in class.  Insurance companies that specialize in these types of risks should have experts on staff that can evaluate the carrier’s operations, assess the risks and recognize if there are opportunities for improvement and be able to offer solutions. Brokers that specialize in representing dangerous goods carriers also need to recognize what makes a carrier best in class.

Best-in-Class Carriers

The best in class transportation companies have policies and procedures in place that focus on safe operations at all levels. They manage driver screening, driver hiring and driver training.  They use technology specific to their needs when ordering equipment and practise emergency procedures in the event of a spill or a crash.

The right combination of a best in class transportation company, a broker who appreciates the complexity of dangerous goods transportation and an insurer with strong transportation loss control expertise will ensure proper coverage is in place to respond to a loss and help minimize the chance of a loss and therefore influence the overall productivity and longevity of that carrier.

The exposure varies depending on the type of goods hauled, safety practices, controls in place and current legislation.

Only a few insurance companies offer coverage to those specializing in hauling dangerous goods as a common, contract or private carrier.

Commodities are considered to be hazardous or dangerous due to:

  • explosion or fire hazard,
  • pollution exposure,
  • contamination,
  • public health concern.

Hazards related to these exposures are not limited to the transportation exposure. It is also important to consider the equipment necessary to transport these types of commodities as well as the loading and unloading aspects.


Prior to 1980, there were no national standards for transporting dangerous goods.  To standardize the transportation and movement of dangerous goods across Canada, Parliament passed the Transportation of Dangerous Goods Act (TDG) in 1980. In addition, in 1985 the federal government, in co-operation with provincial governments developed a comprehensive set of supporting regulations for the transportation of dangerous goods.

The TDG Act was further revised in 1992, and remains in effect today. The regulations have now been completely rewritten in a version referred to as the Clear Language Version. Reference material is available on the Transport Canada website.

Both the federal and provincial governments have agreed that this set of regulations will apply:

  • to all modes of transport: highway, rail, marine and air;
  • to all persons involved: in the transportation process: consignors, carriers and consignees;
  • in all jurisdictions: federal, provincial and municipal. 

Penalties for non-compliance can be severe. Fines of up to $100,000 and even imprisonment can be imposed in the worst cases. To avoid such penalties, proof is required to be provided showing that all reasonable steps were taken to comply with the regulation.

In addition, some municipalities have by-laws specifying routes to be used by vehicles transporting dangerous goods.

The regulations include the implementation of:

  1. placarding and labeling of hazardous goods on the outside of the vehicle,
  2. dangerous goods training for employees,
  3. reporting procedures for when a spill or potential spill occurs,
  4. documentation of the goods hauled and where in the vehicle is kept.

Insurance requirements are also addressed in the Transportation of Dangerous Goods Act. It is a requirement for risks involved in transporting goods considered hazardous under the Act to carry a minimum of $2 million third party limit of liability in Canada and up to $5 million in the US and to provide 30 days notice of cancellation of coverage.


Brokers need to be sure their customers can provide information on proper driver training, certification and class of licence to transport these products.  As outlined in Transporting Dangerous Goods by Truck published by the Canadian Trucking Alliance, they should also be able to provide:

  • classification and naming of dangerous goods;
  • documentation;
  • labels, placards and other markings;
  • specification, selection and use of the means of containment (MoC);
  • emergency response assistance planning (ERAP);
  • safe handling practices;
  • reporting accidental releases;
  • reasonable emergency procedures that must be taken to reduce or eliminate the danger to the public in the event of an accidental release.

Details on the driver include:

  • the number of years hauling the particular product;
  • the last time the Transportation of Dangerous Goods (TDGA) certificate was issued and the expiry date;
  • the training provider;
  • the dangerous goods packaging;
  • the method used to secure and load the vehicle;
  • the drivers emergency procedures in the event of a loss;
  • where the dangerous goods are being hauled, the distance travelled, route and frequency as well as the list of dangerous goods including the product identification number. 

Types of Dangerous Goods 

There are several classes of dangerous goods and associated hazards involved for an underwriter to consider when underwriting and deciding the acceptability of the risk, and these factors determine if the underwriter will accept the risk and under what conditions.

The Transportation of Dangerous Goods Act divides dangerous goods into nine classes according to the type of danger they present. Some of the classes are further divided into divisions which are associated with the hazard characteristics.

Class 1 – Explosives

Class 2 – Gases

Class 3 – Flammable Liquids

Class 4 – Flammable Solids

Class 5 – Oxidizing Substances

Class 6 – Poisonous (toxic) and infectious substances

Class 7–  Nuclear substances

Class 8 – Corrosive Substances

Class 9 – Miscellaneous Products, Substances or Organisms

In addition, many of the dangerous goods are also assigned a packaging group number, which identifies the degree of danger represented.

Emergency Response Requirements

The emergency response requirements of dangerous goods can be found in the emergency response guidebook issued by Transport Canada. Insurers that are very experienced in this kind of risk may be able to assist customers in meeting emergency response requirements.

The Broker should also  provide information on the client’s:

  • readiness and willingness to respond to an incident;
  • employee training for clean up or whatever other measures are required;
  • Availability of sufficient equipment;
  • knowledge of what is required in emergency situations;
  • contact information for  necessary government, fire, and policy personnel along with any private company that may be involved in clean up.

As indicated above, this class of business represents greater than normal exposure. In addition to the standard coverages, environmental impairment, contamination, pollution, clean up, defence costs are all picked up as automobile liability exposure. As a result of this complexity the ultimate claim payout under an automobile policy can be significant. 

Victoria Stirling is national director of transportation for Zurich Commercial Markets, Zurich Canada Ltd.


Copyright 2013 Rogers Publishing Ltd. This article first appeared in the April 2013 edition of Canadian Insurance Top Broker magazine.

This story was originally published by Canadian Insurance Top Broker.