Coffee insurance and accountability

ON THE face of it, the Coffee Industry Board (CIB) did what this newspaper often complains doesn’t happen enough in the public sector: holding people accountable for their actions.

In this case, the CIB fired its legal officer and company secretary, Maria Gayle, for ostensibly underinsuring the agency’s warehoused coffee stock and misleading her principals about it. Yet, it appears to us that there are more questions to be answered and a determination made if others, too, ought not be held to account.

The backdrop to this event is last September’s flood in the Marcus Garvey Drive area of the Jamaican capital, when, during a tropical downpour, several of the city’s clogged drains and gullies couldn’t contain their flow. Several homes and business were deluged.

In the case of the CIB, several tonnes of coffee, including the premium Blue Mountain variety, were destroyed. Under the circumstances, the agency called on its insurers for an estimated US$3 million in compensation. The insurance company declined to pay, arguing that the claim was inconsistent with the terms and value of the CIB’s coverage.

CAUSE FOR CONCERN

In other circumstances, the CIB, a government agency, might have sued. Instead, last month, its governors dismissed Ms Gayle. She hadn’t, they said, provided all the facts about the policy.

However, remarks to this newspaper, by the agriculture and commerce minister, Karl Samuda, in defence of the CIB’s decision, are cause for concern as to whether the board went far enough.

Mr Samuda said: “Looking at the premium signaled to us that it (the coffee inventory) could never have been properly insured, and we really, in all fairness, could not accept producers’ coffee and store it without proper insurance.”

The question now is, at what point did the managers and board determine that the insurance premium payments seemed too low for the expected coverage, and what did they do or say about it? Which raises a number of other issues.

First, legal officers and company secretaries are not the ones who write the cheques and pay the bills of firms. And while they may negotiate and write the contracts, insurance, or other things, senior management and directors have a responsibility to be clear on the specific terms of these agreements. They should read the fine print and ask appropriate questions for illumination.

Further, insurance premiums are generally a big-ticket item for major firms. For a commodity business like the CIB, it would not only be a significant expenditure, but an important one that stands out in the agency accounts. We would expect it to command the attention of managers and board members.

In the recent shake-up, the CIB reverted Steve Robinson, the acting executive director, to his substantive role of chief accountant. It is not clear whether this suggests that Mr Robinson had been aware of the danger of the insurance agreement and didn’t do anything about it. If that is the case, he may have been rightly held to account.

But we still can’t adjust ourselves to how the board escaped unscathed when, as Minister Samuda observed, merely “looking at the premium” payments should have raised a red flag about the quality and value of the insurance policy they possessed.