Workplace violence not only creates prolonged downtime and reputational damage, but the subsequent lawsuits can also bring an organization to ruin.
By Peter Bransden
As stories of mass shootings, active assailants, or ‘lone-wolf’ attackers seem to be an increasingly frequent part of the news cycle, employers face the terrifying possibility that the next tragedy may occur at their workplace. These attacks not only create prolonged downtime and reputational damage, but the subsequent lawsuits brought by victims and their families can bring an organization to ruin.
Wary that traditional General Liability, Workers Compensation, and Property/Business Interruption policies inadequately address this threat, more risk managers are opting for a stand-alone product that includes victim coverages, employer protections, and life-saving risk mitigation.
The risk behind the headlines
It seems barely a week goes by without another report of a mass shooting in the U.S. The increase in news coverage of these tragedies reflects an unfortunate reality; the number of ‘active shooter’ events in the U.S. has doubled since 2000, with 75% of attacks occurring in the workplace. While it is the mass casualty incidents that inevitably make the front pages, incidents of fatal workplace violence occur more than daily. The extent to which employers are obligated to address this risk is clearly a growing concern for organizations.
The Occupational Safety and Health Act requires that employers provide a workplace “free from recognized serious hazards” and establish operating procedures so that employees follow safety guidelines. OSHA data show that homicide is the fourth leading cause of fatal workplace injury, accounting for one in ten workplace-related deaths.
OHSA even goes so far as to recognize that workers in certain industries are particularly vulnerable to workplace violence, citing health care professionals, public sector workers, and services in premises where alcohol is consumed, among others. Appropriate preventative measures, well-written zero-tolerance policies, engineering controls, and training are recognized as across-the-board standards, with further controls needed still for higher-risk industries.
Citing these growing responsibilities, employees are suing their employers following shootings. Some recent cases have reportedly referenced inadequate hiring practices, a lack of training and a failure to take warnings seriously in the complaints. Perhaps the last point is the most critical. On average, perpetrators of mass shootings display four or five early warning signs of concerning behavior according to an FBI study; however, more than 50% of the time when such behaviors were observed, nothing was done.
When faced with the knowledge that not only are these attacks a real and growing threat but that organizations are facing an increasingly tough standard of care, it is no surprise that those who manage risk for a company have turned to the insurance market for help. In response, a new product has emerged from two disparate strands of innovation.
Brokers and underwriters in the standalone Terrorism insurance market began to add Liability coverages to their predominantly Property Damage and Business Interruption-focused products. On the other hand, the Kidnap & Ransom market, with an emphasis on immediate, post-event Crisis Management, has broadened the scope of its offering to include Assault as an insured peril. In recent years, the two products have merged and there are now several carriers in the U.S. and U.K. offering stand-alone policies.
Active assailant insurance: What’s included?
24/7 Crisis Consultancy: Experienced professionals are available (and promptly on-site) to guide management through the aftermath; this includes engaging with victims’ families, liaising with authorities and handling media.
Extra Expenses: Policyholders are able to take a proactive role in assisting victims with medical costs, psychiatric treatment, and funeral expenses. Staffing, premises or security costs incurred following an attack also are covered.
Business Interruption: Active Assailant insurance recognizes that a premises may not be able to re-open promptly following an attack even if repairs have been completed, and indemnifies accordingly.
Loss of Attraction: Business owners may suffer a significant drop in patronage after a serious attack at their premises. The policy will cover the difference in net revenue.
Liability and Defense Costs: Some General Liability policies are silent on the issue of shootings or feature firearms/terrorism exclusions. The Active Assailant market offers clear protection against damages suits and the defense costs involved.
Property Damage: This policy element often acts as ‘first dollar’ protection. Further market innovation has created a policy that offers Demolition and Rebuilds’ coverage for when a building must be razed following a tragedy.
Google searches for Active Shooter insurance have increased since 2015, with more registered in 2018 than any prior year. As it stands, the Active Assailant insurance market offers competitively priced protection against malicious attacks carried out using weapons, ranging from firearms and explosives to vehicles and drones. Within the product, policyholders find valuable coverages that address some of the inadequacies of traditional insurance policies when it comes to confronting this risk.
General Liability policies, for instance, protect organizations against lawsuits brought by victims. But, they generally offer minimal and inadequate coverage in relation to third-party medical expenses. Active Assailant insurance allows the policyholder to make prompt medical payments on behalf of victims, reducing the likelihood that these same victims (or their families) may sue at a later date to recover costs.
Workers Compensation coverage also has significant limitations. It will react to most workplace injuries, but, for example, will often offer no coverage with respect to psychiatric treatment unless the employee also suffers bodily injury. Following a shooting event, employers may find staff in need of counseling, with a gap in their coverage to fund it. Broad Extra Expense coverage within an Active Assailant policy addresses this coverage gap, ensuring that workers are adequately cared for.
What’s more, the Crisis Management coverage element of an Active Assailant policy provides the policyholder with invaluable guidance in the aftermath of an attack. Rebuilding a business following a workplace violence incident is hard enough, without the kind of negative publicity that insensitive corporate statements can attract — such as when Cinemark countersued the victims of the 2012 Aurora Shooting; or when MGM filed a suit against the victims of the 2017 Las Vegas shooting. Well-orchestrated post-incident recovery using experienced and proactive professionals is critical if the organization is to survive.
One of the most valuable aspects of an Active Assailant insurance program for policyholders is prevention training offered by the insurer. This can range anywhere between providing an Active Shooter e-Learning training module for staff, to carrying out an intensive, on-site simulation exercise and a complete review of written safety policies. Insurers frequently offer significant stipends for such training, if not fund it completely.
As these tragedies continue to unfold, it is vitally important that senior management review their strategies and work with insurance professionals who possess intelligent insight and creative products to mitigate this threat. The insurance market has created comprehensive coverage that tackles this multi-faceted risk, offering immediate, preventative solutions through to financial protection and post-incident care.