Shots Fired Active Shooter / Assailant Coverage

Transcription

1 Experience a World of Difference Shots Fired Active Shooter / Assailant Coverage A CRITICAL NEED IN EMERGENCY RESPONSE PLANS WHITE PAPER SEPT 2018

2 Shots Fired Active Shooter / Assailant Coverage: A Critical Need in Emergency Response Plans Public mass shootings are deadlier than ever in the United States. The first modern-day mass shooting occurred in 1966 at the University of Texas in Austin when an architectural engineering student took guns into a campus tower and killed 13 people while wounding more than 31.1 With deadly accuracy, he killed victims as far as two blocks from the tower. As recently as June 2018, a lone gunman killed five and injured two at the Capital Gazette in Maryland. The gunman allegedly was upset about the newspaper s portrayal of him in their news coverage.2 Active shootings are a frequent occurrence in the United States. We know what has occurred immediately when we see the breaking news. After the Newtown massacre, Congress defined mass killings as three or more killed in a single incident.3 In the United States, 2017 saw more mass shootings than days.4 So pervasive is this risk in our society that many executives now inquire about the availability of insurance coverage for a mass shooting. Likely, however, many of your insureds are unaware of this coverage. They could benefit from its pre-event planning and may be impressed with its ratio of premium to value. Active shooting is a risk that every school district, entertainment venue, hotel and organization must consider and aggressively work to prevent. The randomness of these events is what makes them virtually impossible to defend against. Every organization is vulnerable.5 Increasingly, proactive risk managers are buying insurance coverage for such events. Rather than wait for an incident to occur, they evaluate their organizations, look for weaknesses and use this coverage to preplan for an active shooter event. 2

3 Today s active shooter coverage goes far beyond pure insurance, however, by offering a proactive approach to prevention and response. Active shooter coverage allows organizations to holistically plan for the worst type of event before it happens. By offering this coverage, agents and brokers can reduce the possibility of an errors and omissions claim and help clients protect their people and property. This white paper will provide a brief history of mass shootings, discuss how the insurance industry pioneered coverage for these critical events and examine what the future holds in terms of coverage. This paper will also familiarize retail agents with active shooter coverage basics. A Historical Look at Mass Shootings School shootings are not a new phenomenon. The 1990s, however, saw a sharp rise in gun violence in our nation s schools.6 In response, architects began to design schools with interior playgrounds surrounded by buildings to prevent drive-by shootings. With the number of mass shootings continuing to rise, however, architects started viewing environmental design with more emphasis on crime prevention through environmental design. 7 Rebuilding Sandy Hook Elementary School was one challenge undertaken by architects, who designed a hardened entrance where administrators can observe visitors as they approach. This new design included classroom deadbolts that lock automatically and windows coated with glaze that prevent them from being opened enough to crawl through for up to 15 minutes after breached by a gunshot.8 New building designs may now come complete with planned escape routes. This is chilling, but an increasingly vital step in contemporary urban planning. 3

4 Insight into the Response to Violence Mass shootings can happen anywhere. School bullying can trigger shootings, but the concern is not isolated to school shootings. Consider the Mandalay Bay hotel gunman who killed more than 50 and injured hundreds. This random act turned a concert event into a killing field. Authorities now train special response teams and better arm their officers. However, organizations must make their own preparations since police response may not stop the active shooter for some time, especially in rural areas. Police departments are increasing their training efforts to provide a rapid and skillful response to these events. In many active shooting events, officers encounter perpetrators with multiple weapons and long firearms, such as assault weapons. In a small number of cases, the attackers wear body armor and bring explosive devices.9 Smaller police departments lack the intense training of urban officers. When officers went in solo, gunmen wounded one-third of the first responding officers according to one study.10 Today s police officers who are taught the risk of solo entry may gather on-scene intelligence and await backup. However prudent this action, it can increase fatalities and the possibility of negative press. These events are highly complex and evolving. Business owners and risk managers are seeking solutions. Organizations are turning to event policies, for occasions like parades, or to annual policies that offer year-round active shooter insurance coverage. Workplace Violence versus Mass Casualty Events Casualties arise from workplace violence, but there is a difference between events with 4 one or two casualties and an active shooting. The difference is the number of victims.

5 Workplace violence often results from a domestic violence issue or a perceived unjust termination. In these cases, the perpetrator may seek a single or a few victims believed at fault. In active shooting incidents, the perpetrators often select victims at random and the event typically occurs without warning. Active shooters intend to express hatred or rage. Since many of the events end in suicide, this makes containment of the shooter more difficult.11 Wherever the violence occurs and whatever it results from, organizations must move to a more preventative approach and understand that no organization, despite its size or purpose, is immune. How the Insurance Industry Pioneered Coverage Coverage for violent events has several names. These include Shooter Program coverage, Active Assailant Program coverage, or Terrorism coverage that includes active shooter. These names will vary by carrier. For this paper, we will use Active Shooter to cover all of the available forms. With the changing face of extremism, it became clear to insurers and their larger clients that Terrorism, Kidnap and Ransom coverages were inadequate to cover the liability and property damage and business income losses arising out of an active shooter event. Carriers responded within the last two years by developing a unique product referred to as Active Shooter coverage. Some carriers created a standalone active shooter policy while others enhanced their terrorism policies to offer not only Property coverage, but also Liability coverage. Active shooter policies can also include post-incident crisis management services. How the organization responds to an active shooter event is critical. Organizations must not let their crisis response become the next crisis. Even the most experienced public relations professionals in an organization probably have no training in managing an active shooter media response. They need advice on 5

6 what to say and how to handle situations like Broward County encountered after its 2017 airport attack. The county faced frustrated travelers and spent over half a million dollars to return luggage abandoned by travelers after that violence.12 Organizations are shifting from responding to an event to a more holistic risk management model. Today, the insurance industry is developing solutions that not only respond to losses, but also help to prevent losses from occurring, a more proactive approach to insurance coverage. Today s Active Shooter Events Violence may start with threats such as a Facebook post warning. Other threatbased workplace events such as bomb threats, school threats, or targeted harassment can call for additional security, closure for bomb sweeps and other business disruption. Most active shooter insurance forms cover stalking and harassment threats. In less severe harassment cases, monitoring or performing behavioral risk assessments to head off incidents is money well spent by carriers. Since active shooter events continue to evolve, unanticipated costs can occur. For example, an organization may require additional temporary security after a workplace incident. Under some coverage forms, coverage is available for employee counseling and retraining, reservation cancellations such as those faced after the Mandalay Bay event, and other unanticipated costs. Even with smaller events, resultant costs can run in the millions. Public relations fallout and subsequent reduced revenue is almost a certainty. It can take years for businesses to repair their brand after events of this nature. Crisis counseling, funeral expenses, a crisis response hotline, media management policies differ in their coverage offerings. It is important to work with a wholesaler who can guide you to determine the best policy fit for your clients. 6

7 Active Shooter Coverage Overview What s Available in the Insurance Market Active shooter coverage is not a standard form. Coverage is available in standalone policies or insurers can endorse Terrorism and Sabotage/Threat policies to provide coverage. The names of the coverage will vary and so will the coverages. Active Shooter Protection coverage is a newer Liability and Property coverage designed to protect organizations at risk from an active shooter event. How forms define an event and the type of weapon used to trigger the event may vary. Agents must read the forms, the insuring agreements and understand the definitions and exclusions. This approach can help ensure agents recommend the coverages that work best for their clients particular needs. For example, a special-events policy may be available for a one-day event like a parade while other clients will want year-round coverage. Additionally, there are carriers who will provide Property Damage and Business Income coverage only, with no liability component. These property policies will also provide critical post-event services such as crisis management teams, public relations help and general event response management. In the 2007 Omaha, Nebraska, mall shooting, authorities closed surrounding businesses after the event for several days during their peak season.13 The standard special form policy will only cover a loss caused by actual physical damage to the insured s property due to an insured peril the special form excludes active shooter. How forms define an event and the type of weapon or weapons used in the event are important. 7

8 For example, some policies do not define weapon while one carrier defines weapon as a firearm, handheld weapon, moving vehicle, or the use of an explosive device in conjunction with the former weapons. Reading the policy definitions can help agents understand what type of events or actions the policy will cover. The policy trigger for most forms is an active shooter, act of terrorism, or an active assailant event as defined in the policy. Carriers generally write the Liability coverage on a claims-made basis, and liability limits of $20 million or more are available in many instances. Over $50 million in Property coverage is available. Active shooter policies generally function as enhancements to primary liability insurance in conjunction with the other insurance clause. If a third party sues your insured for liability, some general liability (GL) policies could respond. However, GL policies may also exclude acts of terrorism and have other coverage limitations. For example, some GL policies may exclude acts committed by employees, such as a disgruntled worker who turns on his or her colleagues or managers. In addition to adding more limits, the loss prevention and crisis response services offered by active shooter policies protect your insureds for an affordable premium. Of course, these policies will exclude all first-party damage and business income except for an incidental sublimit of $500,000 or less on GL policies while full limits are available on some Property policies. Key Benefits of Active Shooter Coverage When a catastrophic event occurs, impacted organizations contact two people: their insurance agent and their attorney. Active Shooter coverage offers a onestop solution to a tragic situation. 8

9 Even the most proactive organizations with environmental design and state-ofthe-art security measures in place remain vulnerable to an active shooter. While every organization today is at risk, organizations can take steps to be ready if a tragic event occurs. Planning for an attack can help an organization limit its liability and reduce fatalities should an event occur. Carriers writing this coverage provide other critical services. These may include special counseling post-event, around-the clock crisis management response teams and access to a panel of seasoned event responders, including highly experienced public relations personnel. While subject to sublimits, these benefits can help an organization minimize its income loss and help its employees return to a new normal faster than an organization facing these challenges alone. While most organizations have little or no experience in training employees how to respond if an event occurs, a risk assessment at key locations offered by some carriers may recommend reinforcing doors, improving environmental barriers and training staff in appropriate response. These steps may save lives and reduce liability. Policy Features Written on a claims-made basis with coverage available to $35 million and up, policy forms may provide defense within limits. Agents should always ensure that their clients understand this provision. The impact of these events lingers for years and so will the litigation. In the Mandalay Bay shooting, a victim filed the first lawsuit only ten days post-event.14 By November 2017, hundreds of victims had filed suit.15 It will take years for the organization to resolve the problems arising from this tragic occurrence. Policies offer either a self-insured retention or a deductible. Most carriers forms cover property damage for a small sublimit. There are active shooter property 9

10 policies that will cover insureds for damage to their owned property and for their business income exposure. Active Shooter is an emerging coverage, and as new exposures arise, insurers will attempt to address them. Some policies will cover miscellaneous expenses that might occur, including relocation of key personnel, loss of attraction income and employee retraining costs. Some employees will be unable to return to the venue and some forms will help defray the costs to rehire and retrain. The New Face of Liability Insurance Coverage Insurance coverage evolves to meet the needs of the society it protects. We have already seen that evolution in Cyber and Terrorism coverage. Active Shooter coverage is the new face of emerging liability insurance. As incidents of this nature continue, demand for this type of policy will rise. Initially, healthcare systems, larger school systems, and high-focus events like concert venues purchased this coverage. Today, submissions are off the charts according to one insurer representative, and bind ratio is high. Organizations are not simply shopping the coverage, they are also purchasing it. According to one carrier s representative, It s evolving to almost main-street coverage. For the average small risk such as community churches, auto dealerships, small restaurants, or retail shops, premiums can be low for the breadth of coverage the policies provide. Risks such as concert venues, school districts and municipalities that are more vulnerable to an active shooter attack will see higher premiums. Retail brokers who work in the hospitality or the public sectors should be sure they offer this important coverage to their clients now. Charter and other schools, summer camps, stadiums and concert venues are not only looking for coverage, they are seeking a fully rounded solution before an 10

11 event occurs. Active Shooter coverage can help risk and event managers plan for the worst-case scenario event, hoping it will never occur. This type of pre-planning can save lives and reduce liability. The Underwriting Submission Because Active Shooter is an emerging coverage, underwriting concerns will change as events continue to occur in the US. Ten years ago, for example, no one could envision going to a movie theatre only to encounter an active shooter. Underwriting scrutiny heightened and grew as the threats from domestic terrorism increased. Today s underwriters look at a variety of factors. What are the hours of operation of the organization? Where is the risk located, and what are the crime rates in that area? How many locations are involved? Are there large amounts of cash on hand? Does the organization have guards on site, such as school security officers? What environmental design elements such as secured entries and bollards may reduce the likelihood of an event? What is the organization s human resource culture? Does the organization have a robust internal system for tracking employee behavioral changes? How does the organization handle terminations? Are terminations well- planned and designed to preserve dignity? What is the management structure? Perhaps more so than other insurance submissions, the organization s risk management approach will be a critical component of successfully underwriting these risks. No organization is immune today, yet few organizations have a solid plan in place to deal with these events. With the help of Active Shooter coverage, an organization can better protect itself with effective pre-planning. 11

12 Benefits of Offering this Coverage While no one can predict the future of these events, carriers who write Active Shooter coverage are proceeding on the belief that these events will continue. Coverage will improve as claims occur and forms respond to emerging risks and new damages. First-look services will dovetail with emerging risks. With coverage, recovery will be much less chaotic for insured organizations when an active shooter event occurs. Reputational risk exposures will continue, but the public relations teams will carve new paths through post-incident media management. Offering this coverage can reduce the possibility of an errors and omissions claim. It can also allow you to grow your base, using this unique coverage as your foot in the door of new business. What you offer is a unique, emerging coverage that all parties hope will never be used post-loss. 12

13 Rely on Worldwide Facilities Worldwide Facilities, LLC, is a national wholesale broker and managing general agent providing services to insurance agents and brokers. In business since 1970, our seasoned team of brokers and underwriters offers specialized knowledge, broad access to specialty markets and extensive expertise in placing challenging insurance risks. We offer unmatched tools, resources and strategies to help insurance agents and brokers expand their corporate accounts to include the ever-changing active shooter market. Take advantage of our expertise in placing active shooter risks today contact: Kelsey Moore at (213) or kmoore@wwfi.com Brooke Leadbetter at (213) or bleadbetter@wwfi.com Shani Stewart at (213) or sstewart@wwfi.com to schedule a conversation. 13

14 Notes 1 The Associated Press, Beginning of an Era: The 1966 University of Texas Clock Tower Shooting, NBC News. July 31, Bonnie Berkowitz, The terrible numbers that grow with each mass shooting, The Washington Post. February 20, Government Publishing Office, Public Law th Congress, US Government. January 14, John Haltiwanger, There Have Been More Mass Shootings in the U.S. in 2017 Than Days, Newsweek. August 29, FBI, A Study of Active Shooter Incidents in the United States Between 2000 and 2013, FBI.gov. February 13, Michael Dorn, Seven Important Building Design Features to Enhance School Safety and Security, Indiana Department of Education. November 19, Ibid. 8 Kelsey Atherton, Landscape architects now design for mass shootings, The Verge. October 13, The Police Response to Active Shooter Incidents, Police Executive Research Forum. March Ibid. 11 Ibid. 12 Larry Barszewski, Broward pays more than $500,000 returning abandoned belongings following airport shootings, SunSentinel. December 8, VU Faculty, Business Income Loss Due to Mall Shooting, Independent Insurance Agents & Brokers of America, Inc David Ferrara, Woman files 1st lawsuit against MGM Resorts over Las Vegas shooting, Las Vegas Review-Journal. October 11, Tina Bellon, Hundreds of Las Vegas shooting victims file lawsuits in California court, Reuters. November 20,

15 Disclaimer This whitepaper is Copyright 2018 by Worldwide Facilities, LLC. It may be freely redistributed in its entirety provided that this copyright notice is not removed. It may not be sold for profit or used in commercial documents without the written permission of the copyright holder. This whitepaper is provided as is without any express or implied warranty. This whitepaper is for educational purposes only and does not purport to provide legal advice. If you require legal advice, you should consult with an attorney. The information provided here is for reference use only and does not constitute the rendering of legal, financial, or other professional advice or recommendations by Worldwide Facilities, LLC. The listing of an organization or website does not imply any sort of endorsement and Worldwide Facilities, LLC takes no responsibility for the products, tools, and Internet sites listed. 15

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