How Active Assailant Insurance Can Help Your Business Survive after a Mass Casualty Event

Co-authored by Chantal Roberts, CPCU, AIC, RPA

Are those firecrackers? Is a car backfiring? Perhaps there’s a disturbance of some kind. Today’s managers and owners rarely consider if an active shooter incident can occur on their property. Unfortunately, active shooter or active assailant incidents are more prevalent in the United States than ever before. Due to the increasing occurrence of this type of loss, a business that faces this situation may find itself without coverage for many claims that arise post-event. These uncovered losses can include posttraumatic stress (PTSD) treatment, structural improvements of buildings, post-event security, or the inability to handle the onslaught of media post-event.

This article outlines typical policies most businesses buy and describes additional coverage business owners should consider to protect their business, employees and customers/guests if the unthinkable event occurs. It discusses active assailant policies along with other risk prevention techniques. This article helps business owners understand the liability products available and provides some pricing examples. Active assailant coverage is surprisingly affordable, and while not right for every business, certain owners will want to obtain a quote for this important coverage.

Definitions Matter

According to Vox, the week of January 5, 2014, is the only full calendar week without a mass shooting since January 1, 2013. As of April 27, 2019, 104 mass shootings killed 124 people and wounded 375. The Gun Violence Archive defines “mass shootings” as “events in which four or more people, excluding the shooter, were shot.”[i] So ubiquitous are mass shootings that the shooting on the last day of Passover, 2019, in a Poway synagogue did not make the front page in most major newspapers.

The U.S. Department of Justice and the Federal Bureau of Investigation (FBI) outlined active assailant incidents in 2016 and 2017. The FBI found 20 occurrences in 2016; the number increased to 30 in 2017. Unlike the Gun Violence Archive, the FBI excludes gang- and drug- related activities as well as gun-related activities that do not harm others. All 50 shooters were males who acted alone, and the majority of them were in their 20s.[ii] Active assailants focus on soft targets – locations with a high number of people and low security. The events usually occur in businesses (45%), schools (25%) and government facilities (10%).[iii]

The U.S. Department of Homeland Security defines an active shooter as “an individual actively engaged in killing or attempting to kill people in a confined and populated area, typically through the use of firearms.”[iv]

This definition may be important because not all active assailant insurance policies define an active assailant event in the same way. An active assailant incident can range from a shooting, a stabbing, or an explosion such as the Boston Marathon bombing, to individuals driving automobiles into a crowd.

Insuring agreements (the insurer’s promise to pay), definitions and exclusions differ among policies. Historically, active assailant policies stemmed from terrorism and kidnap and ransom policies. However, as these horrific events escalated and the types of damages began to increase, underwriters and claims professionals recognized that these policy forms failed to meet their clients’ needs.

The public and employees began placing more expectations on business owners to protect them from harm. Often business owners failed to recognize their standard commercial policies could leave them with large, uncovered losses, losses that would exceed their policy limits and litigation costs that could devastate a small-to-medium sized company.

Overview of Standard Commercial Insurance Policies

Most business owners buy several insurance policies, such as commercial property and liability, worker’s compensation and business interruption coverages. Attempts by the insurance industry to modify current business policies to cover these events still left coverage gaps for active-assailant incidents. Clearly, society needed more protection.

During an active assailant incident, bullets, explosions, or the police knocking down doors to gain access to the interior will damage the building. Provided the business has the “special” cause of loss form, the insurer would probably cover the damages if the insured meets all other insurance provisions.

The general liability (GL) policy responds when the business owner is “legally liable” for an accident and has breached a duty or standard of care. The business owes an invitee, its customer, a high duty of care to provide an environment free of hidden risks or perils. However, when an active assailant strikes with little or no apparent connection to the property, how can the business’ customers and employees find liability against that owner? While the general liability policy should provide a defense, it may provide few if any benefits to injured customers or employees.

This is where active assailant policies can be invaluable. Paul Marshall, the Managing Director of the Active Shooter/Workplace Violence Division Team at McGowan Programs, one of the premier writers of this coverage, likened the coverage to a “go-fund me account.” The policy will provide immediate benefits, without the wait to determine liability, according to Marshall.

Additionally, while the GL policy provides medical, funeral and death benefits for the customer, regardless of fault, payable amounts are usually $1,000 or $5,000, which may not cover all personal expenses resulting from an active assailant incident. Additionally, costs for an active assailant event, such as cleanup, media control and other costs not faced by a typical injury on a business’ premises can be expensive.

The Occupational Safety and Health Administration (OSHA) Act of 1970 mandates a business ensure the “safety, (health) and security of employees.” As a general standard of care, OSHA can find employers responsible if employees receive “reasonably foreseeable” injuries.[v] While worker’s compensation policies are necessary to provide for the health and well-being of employees injured at work, policies usually extend coverage for the employee while in the course and scope of the job. What about workers who have left their post and are injured as they walk away from the job site? Would they find coverage under workers compensation? Court decisions are still rare regarding these types of events.

Similarly, if an incident arises out of a personal quarrel such as domestic violence, coverage may not apply since the incident does not result from employment. Because workers compensation courts are state-specific, no federal standard applies. One state may find a connection to employment that another state does not.

Business interruption policies are important for the continuation of a commercial endeavor after a loss, but the policy responds only when “direct physical loss of or damage to property at premises…” occurs.[vi]

An employer’s current business policies may leave the owner with significant coverage gaps after an active shooter event. As society changes, insurers respond. Beginning in London and now firmly entrenched in the U.S., specialty insurers in the surplus lines market developed policies to meet the needs of business owners should an active assailant event occur.

Why Every Business Owner Should Consider Active Assailant Coverage

While business owners have many reasons to want active assailant coverage, the most important reason is that the policy helps them avoid large uncovered losses from an active assailant event, losses that would cause the business financial hardship.

A standard commercial property coverage policy will pay to restore the property to its state prior to the loss. However, if the business wants to tighten security by reconfiguring entrances and exits, the property policy would not cover such renovation costs. School administrators rebuilt Sandy Hook Elementary School after the shootings not only to focus on increased security but also to rearrange the school in response to those suffering from PTSD.[vii] The rebuilding of the Sandy Hook elementary school cost Connecticut taxpayers $50 million. A standard commercial property policy would not provide that coverage, even given actual damage to the premises itself. Some active assailant forms will provide that coverage.

Liability policies respond if the active assailant event meets the definition of an “occurrence” as defined by the policy. If an active shooter or other event causes multiple injuries or fatalities and a court rules the event is one occurrence, an owner’s liability policy limits will quickly erode. While it may seem beneficial for the court to determine that such an event constitutes more than one occurrence, this, too, can harm a business that has a large self-insured retention or a high deductible.[viii] Finally, liability policies generally have assault and battery exclusions and terrorism exclusions. It is possible the insurer could invoke these exclusions and deny the damages.

As mentioned previously, a workers compensation policy may not respond to employees’ medical needs if the employees are not in the scope and course of their employment when the event occurs and if the attack on employees is unrelated to the workplace.[ix] For example, an administrative law judge may not find a purely personal quarrel between spouses or intimate partners work-related. Many workplace fatalities arise from domestic quarrels. In workplace shootings between 2003 and 2008, a current or former partner killed nearly 33% of the female decedents.[x]

Other Insurance Considerations

If the business did not sustain direct physical damage from an active assailant event, the business interruption policy would not respond. However, if police quarantine the area during investigation and the business cannot reopen during that time, coverage for civil authority may apply. Business owners should discuss this important item with their current brokers to determine if they have coverage and if their limits are appropriate.

The “Other Insurance” clause appears in nearly every policy (except life insurance) and is most prevalent in property and liability policies. This clause establishes how multiple insurers will pay a loss where the event triggers more than one policy. Depending on policy language, the policy will provide no coverage if there is another insurer that covers the same risk; or it will provide a proportionate share of the damages with the other insurer; or it will be in excess of the other insurer. Policies include this language to prohibit a business from profiting by submitting a loss as the same claim to more than one insurer. Check this clause in the active assailant policy to ensure these policies are primary, not excess, of other liability coverage.

Finally, an insurer could consider an active assailant occurrence as an act of terrorism, which a business’ policy purchased under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) could exclude.[xi] The incident must meet certain criteria, such as property and casualty losses of more than $5 million. Additionally, the U.S. Secretary of the Treasury, the Attorney General and the US Secretary of Homeland Security must declare the loss a “Certified Terrorist Attack.” The government did not certify the Boston bombing event because damages did not exceed the $5 million threshold.[xii] In addition, for insurers to consider the active assailant event as an act of terror, the act must be a part of “an effort to coerce the civilian population of the United States or to influence a [U.S. government’s] policy…”[xiii]

What Is Active Assailant Insurance?

After an agent or broker reviews the current coverages of a business, the agent may offer active assailant insurance as a separate policy. Active assailant coverage can help fill coverage gaps so the business does not face uncovered losses that are potentially bankrupting. Coverages encompass crisis management aid, off-site/international attacks, loss of attraction losses and prevention techniques.

Indirect loss costs arise unexpectedly after active shooter events, and active assailant policies help to stem those costs. For example, after a 2017 airport attack in Florida, Broward County spent over $500,000 to return luggage abandoned by passengers.

Unlike standard business policies, most active assailant policies offer crisis management both pre-event to help plan for an active shooter and post event. Hiscox’s terrorism policy evolved to encompass active assailant coverage, according to Jennifer Rubin, head of Hiscox’s terrorism, war and political violence division. Hiscox partners with a public relations company to provide crisis management services, both firms working with the media to ensure that communication flows smoothly post event.[xiv]

Post event, experts reassure families and demonstrate to the public that the business is handling the assault with competence and consideration. The insurer also may facilitate victim counseling and plan steps needed to assist crisis victims. Crisis management will help the business return to customary operations more quickly than business owners who deal with the aftermath of these events on their own.

Business interruption coverage does not begin unless direct physical damage or a shut down due to civil authority occurs. Likewise, a business interruption policy would not respond to a business downturn because customers no longer feel safe at the location. This contingent loss – not a direct loss like damage to the building itself, but an indirect “loss of attraction” because of the event – can be fiscally devastating. An active shooter policy can help with this contingent loss.

Litigation is costly regardless of the type of loss, and it is beneficial for a business to obtain broad coverage for the litigation that will follow an assault. Some carriers writing this coverage offer loss prevention services pre-event so that businesses can identify troubled individuals in an effort to avoid the event all together.[xv] These services may include training and social media monitoring as well as other pre-loss activities.

Business owners must take special care when reading their policies to understand the policy definitions and determine when coverage is in-force. For example, while workers compensation may cover employees’ injuries, the active assailant policy may specifically exclude such injuries, according to McGowan’s marketing material. A business owner should require an endorsement naming the employees, volunteers, or students as insureds to prevent the form from excluding these persons from coverage.

Determining thresholds or maximum amount of coverage is an important decision. Is $1 million in coverage enough considering your exposure or would $3 million be better? Most small businesses usually choose between $1 million and $3 million in limits, according to several active assailant underwriters.

In some policies, coverage begins after a certain number of victims are physically wounded or deceased. The policy may also limit a maximum number of victims – for example, the limit could be set at 50 victims. It is important to consider not only the deceased victims of the active assailant but also those who have emotional or mental trauma due to the assault. On March 23, 2019, in Coral Springs, Florida, police responded to a second student who died from suicide – a student who initially survived the shooting at Marjory Stoneman Douglas High School on February 14, 2018. Therapists diagnosed the student with PTSD while at university, and the school district provided therapy animals and counselors. This help may be insufficient for many survivors.[xvi]

Policy definitions play a major role in an active assailant policy. Consider whether the policy covers only an active shooter or if assaults by knives and explosives also are covered losses. Additionally a policy may exclude assaults by vehicles. In London in June 2017, assailants used an automobile to drive into a crowd of pedestrians.

Each policy will respond to the crisis differently based on how it defines the event or occurrence.

A policy could describe a firearm as loaded to be “deadly,” and a firearm must meet that definition before coverage would apply. For example, absent threats of deadly force or no bodily injuries, deaths, or attacks with loaded firearms, PTSD claims may not be covered. Business owners should consult their agents and brokers to ensure they have the broadest coverage available given the premium.

How Costly is Active Assailant Coverage?

Most small-to-medium sized business owners today buy coverage limits of $1 million or $3 million, as previously mentioned. Larger businesses can buy limits up to $100 million, according to one underwriter.

Underwriters base quotes on number of employees added to annual number of guests for retail stores, schools and other establishments. They use crime maps to assess all locations and a variety of other factors to determine premium. Many carriers use a three-page or less application, so applying for coverage is easy. Business owners can obtain quotes through insurance agents who offer more nuanced coverages. If your current agent cannot help you, visit Trusted Choice at the Independent Insurance Agents & of America website to find a drop-down menu that will help you locate an independent insurance agent in your area.

Premiums are still affordable. For example, an art museum in a major city purchased $1 million limits for $3,000. A New Jersey hotel purchased $1 million limits for $6,500. A stock brokerage in Pittsburgh with 1,515 employees and yearly visitors would pay about $1,340 for $1 million coverage or $2,320 for $3 million coverage.

While active assailant policies have covered some recent events, these are “long-tail” claims, meaning it may be years before carriers total the final loss numbers. Because carriers writing the coverage have little history on which to base rates, the rate future remains cloudy.

Other Risk Management Tools

Business owners can protect themselves by employing methods other than insurance, such as monitoring social feeds and conducting emergency drills.

One idea in this era of protection against active assailants is to arm front-line personnel. Fourteen states allow teachers to carry guns in the classroom.[xvii] The belief is that armed personnel can defuse the active assailant situation before the police arrive. Arming personnel may open the business to a higher standard of care and higher premiums.

Underwriting applications ask if a business has armed guards. Always completely disclose your business’ current situation on the policy application. Any mistakes or misrepresentations could void coverage.

Unfortunately, juries could find that armed personnel were acting as an agent of the business, which increases the business’s liability. While active assailant insurance applications ask if the business has an onsite security team, armed civilians could eliminate any potential carriers willing to underwrite the risk.[xviii]

Just as schools conduct tornado and fire drills, a business can reduce the risk of casualties by using active assailant scenarios to develop a plan, implement it, and train employees, students and other covered personnel. In these simulations, participants develop a clearer vision of how to remove themselves and their customers from the situation until help arrives, if possible. Insurance applications ask who designed the business’ emergency plan and if a risk-consulting firm reviewed it

Applications also ask about past threats and attacks. Again, always disclose any events or activities that might be important to the underwriter considering the risk.

It is also useful for employers to monitor social media feeds. Monitoring social media can help identify an employee or person who might become an active shooter. In the case of the shooting at Marjory Stoneman Douglas High School, the school had expelled suspect Nikolas Cruz for “disciplinary reasons.”[xix] In the police and FBI investigation of the shooting, social media posts from Cruz showed weapons lying on a bed and a YouTube message stating, “Im [sic] going to be a professional school shooter.”[xx] Being aware of these red flags and taking action when found can help reduce the risk of an active assailant event.

How Will a Carrier Handle Your Claims?

The insurance industry divides insurance in the U.S. market into two categories: the admitted market and the non-admitted market. The admitted market insurers, also known as “standard market carriers,” are insurers who are “admitted” to carry out insurance functions in a state. Admitted carriers follow each state’s department of insurance rules and regulations. Non-admitted carriers are often excess and surplus line insurers and operate in the state without conforming to each department of insurance approval process. This difference is important when it comes to claim handling since most admitted carriers have their own claims department while non-admitted insurers often use third-party claim administrators (TPA), which are independent firms hired by carriers to handle its claims.

When considering active assailant coverage, ask about the claims process should an incident occur. You will require swift assistance following an assault. Carriers are currently developing a new type of claim team to handle these losses, trained and ready to deploy overnight. These specialty teams should encompass worker’s compensation adjusters who understand traumatic injuries management as well as aspects of PTSD; liability adjusters to address non-employee claims; property adjusters to appraise physical damages to buildings; and a lead or general adjuster as a point person with whom the business can correspond and coordinate plans. One of the closest models to these types of teams is airline disaster adjusters.

Admitted insurers such as AIG have their own staffs. Non-admitted carriers like syndicates at Lloyd’s of London generally contract with large TPAs, which have a dedicated crisis management team familiar with active assailant events.

It’s a New Time in America

Experts say no one can predict an active shooter occurrence. However, due to their increasing frequency, the insurance marketplace has stepped forward to address the concern. Preventive steps offered by some carriers range from helping employers identify troubled individuals before they kill to providing training designed to teach those in a crisis how to respond to reduce casualties.

No policy can be “one size fits all,” but careful coordination with an experienced insurance agent will help you avoid financially catastrophic and uncovered losses that could force your business into bankruptcy.

Work with an Agent Who Understands Active Assailant Coverage

A recent article in Insurance Journal warned agents about straying into coverages outside their expertise. Active assailant coverage is new and emerging. Few agents have deep expertise in this coverage. It pays to know your agent and ask what experience she or he has in placing this coverage.

According to Lori Hunter, a broker with Worldwide Facilities in Los Angeles, “This coverage is highly specialized and few brokers have expertise in part because it is a newer coverage. Only a few companies quote this line [of coverage], so my recommendation is to ask for two or three quotes and go over the policy forms with your agent. Pay special attention to the insuring agreement, the definitions and the exclusions.

“If you remain unsure about coverage ask your agent to arrange a call with the underwriter or representative from the wholesaler or MGA that quoted the risk to answer any questions you may have.”

Will These Events Continue to Escalate?

Active shooter and other mass violence events in America are not going away. We are probably years away from gun regulation, although students of the Parkland shooting sparked a national trend of activism that may result in legislative changes. Increased political rancor, greater alienation in our population and untreated psychiatric disorders are just some of the reasons we may see these events, whether with guns or other weapons, continue to increase.

In a 2015 essay by Malcolm Gladwell, author of The Tipping Point, discussing the work of sociologist Ralph Larkin, Gladwell wrote that the Columbine shooting “laid down the ‘cultural script’ for the next generation of shooters.” Gladwell suggested that “low threshold” shooters would be motivated to act. “The problem is not that there is an endless supply of deeply disturbed young men who are willing to contemplate horrific acts. It’s worse. It’s that young men no longer need to be deeply disturbed to commit horrific acts.”[xxi]

Should You Consider Active Shooter Coverage?

Virtually all business owners today should determine if their business could be the target of, or adjacent to, an active shooter event. Today’s active assailants not only focus on schools, but they also focus on soft targets – locations with a high number of people and low security. Malls, theaters, taverns near areas where the public congregates, houses of faith, charter schools – no organization with public access should consider itself exempt from this type of tragic event. An event that occurs nearby can spill over into your establishment.

According to the Department of Homeland Security, active shooter situations typically evolve quickly, are highly unpredictable and usually end within 10-to-15 minutes. The damages, both physical and psychological to people as well as property damage costs, however, will persist for years. As active shooters continue to threaten and insurers respond, coverage will change, both narrowing and expanding to manage the tragic consequences of these violent mass events. An annual discussion with your agent prior to renewal or when circumstances change in your business can help ensure you have the most appropriate coverage for your current loss exposures


[i] Lopez, G., & Sukuman, K. (2018, July 09). Mass shootings since Sandy Hook, in one map. Retrieved April 3, 2019, from https://www.vox.com/a/mass-shootings-america-sandy-hook-gun-violence

[ii] United States, US Department of Justice and Federal Bureau of Investigations, FBI. (2018, April). Active Shooter Incidents in the United States in 2016 and 2017. Retrieved April 3, 2019, from https://www.fbi.gov/file-repository/active-shooter-incidents-us-2016-2017.pdf

[iii] Active Shooter Facts. (2018, November 30). Retrieved 3 April 2019 from https://alertfind.com/active-shooter-facts/

[iv] United States, US Department of Homeland Security. (n.d.). Active Shooter Pocket Card. Retrieved April 1, 2019, from https://www.dhs.gov/sites/default/files/publications/active_shooter_pocket_card_508.pdf

[v] Moorcraft, B. (n.d.). What is active shooter insurance coverage? Retrieved April 1, 2019, from https://www.insurancebusinessmag.com/us/guides/what-is-active-shooter-insurance-coverage-118961.aspx

[vi] Insurance Services Office, Inc. Business Income (and Extra Expense) Coverage Form; CP 0030 (10/12).

[vii] Delgadillo, N. (n.d.). With Shootings on the Rise, Schools Turn to ‘Active Shooter’ Insurance. Retrieved 1 April 2019 from https://www.governing.com/topics/education/gov-cost-of-active-shooters-insurance.html

[viii] Marshall, Paul. Buyer’s Guide: Active Shooter Insurance; Retrieved 27 March 2019 from  www.mcgowanprograms.com

[ix] Marsh Risk Consulting. (n.d.). Protecting People and Operations from Active Shooter Threats (Tech.). Retrieved April 1, 2019, from http://www.micolleges.org/sites/default/files/Active Shooter White Paper-11-30-17.pdf

Michigan Independent Colleges & Universities

[x] The Facts on Gender-Based Workplace Violence. (n.d.). Retrieved April 22, 2019, from https://www.workplacesrespond.org/resource-library/facts-gender-based-workplace-violence/

[xi] Ibid.

[xii] Boston Bombing Lesson: Risk Managers Urge Better ‘Terror Act’ Certification. (2015, March 18). Retrieved April 28, 2019, from https://www.insurancejournal.com/news/national/2015/03/18/360930.htm

[xiii] Marsh Risk Consulting; Marsh’s Casualty Practice; Marsh’s Property Practice. Protecting People and Operations from Active Shooter Threats

[xiv] Hiscox’s Rubin: The Range of Active Shooter-Type Scenarios Is Expanding. (n.d.). Retrieved April 3, 2019, from http://www.ambest.com/video/MediaArchive.aspx?lid=5382700427001&vid=5412304855001

[xv] Marshall, P. (2018, September 3). Insurance Coverage for Active Shooter Risks. Retrieved April 3, 2019, from http://www.rmmagazine.com/2018/09/04/insurance-coverage-for-active-shooter-risks/

[xvi] Mazzei, P. (2019, March 24). After 2 Apparent Student Suicides, Parkland Grieves Again. Retrieved April 2, 2019, from https://www.nytimes.com/2019/03/24/us/parkland-suicide-marjory-stoneman-douglas.html

[xvii] Maqbool, A. (2018, December 07). Inside a US training course to arm teachers. Retrieved April 2, 2019, from https://www.bbc.com/news/world-us-canada-46473321

[xviii] Heisler, A. (2018, May 03). Allowing Guns in the Workplace Introduces Liability Risk. Retrieved April 2, 2019, from https://riskandinsurance.com/workplace-violence-arming-managers/

[xix] Kennedy, K. (2018, February 15). School shooting suspect made ‘disturbing’ social media posts. Retrieved April 2, 2019, from https://www.policeone.com/active-shooter/articles/471096006-School-shooting-suspect-made-disturbing-social-media-posts/

[xx] Penney, T. (2018, February 15). Prior social media posts and active shooters. Retrieved April 2, 2019, from https://www.slideshare.net/TerryPenney/prior-social-media-posts-and-active-shooters

[xxi] Gladwell, M. (2019, April 19). How School Shootings Spread. Retrieved from https://www.newyorker.com/magazine/2015/10/19/thresholds-of-violence

Tops tips to bulletproof your workers’ compensation program

workers compensation
Is your workers’ compensation program for the birds?

Last week I presented on ways employers can improve their workers’ compensation program at the Arizona Small Business Association’s annual meeting. Here are the key takeaways for Arizona businesses who have workers’ compensation insurance.

Don’t treat employees as subcontractors. Many businesses, especially in the trades like plumbing or roofing, make this costly error. This is a priority fix both for your employment tax obligations and for covering your employees under workers’ compensation. In Arizona, all you need is one full- or part-time employee (as defined by the IRS or an administrative law judge) to need workers’ compensation insurance.

Tighten injury reporting protocols. Rapid report to your carrier makes a huge difference in workers’ compensation costs. Back injuries are 35% more expensive if not reported within the first week, for example.

Do you have the best agent for your business needs? Does the brokerage or agency offer tools like Modmaster to help you reevaluate your experience modification factor and pinpoint what each injury costs? If not, maybe it’s time to find a new agent.

How’s your safety culture? Safety begins at the top. Employees can’t push safety uphill. Beginning each meeting with a safety report and forming a safety committee of line employees will make a big difference in your organization’s culture.

Where do you need safety training? Can your agent or insurer provide training resources? Spending a little money for training will save you lots of money (and administrative costs)  in the long run.

Do you need stronger hiring practices? Spend money pre-hire by using thorough pre-employment physicals, background checks and testing to eliminate undesirable candidates before you hire them.

Do you know who your adjusters are? Ask your carrier for an introduction if you haven’t met them. Skype or phone conferences quarterly can help, or better yet, on-site visits to discuss each loss, will help reduce costs.

Hone in on those claims where employees don’t get better. Work with your carrier to manage these long-term claims. Ask your adjuster to specifically outline their plan of action on the claim.

Do you have a return-to-work program? If not, you run the risk of an employment claim and increase the cost of each of your claims. Never tell an employee, “We can’t take you back until you’re 100%.”

Make your workplace a healthier one! Comorbidities like obesity, diabetes and hypertension drive medical and workers’ compensation costs. There are many vendors that can bring resources to your workplace to help manage health, including your health insurance carrier.

If I can help you improve your workers’ compensation program, call me for a no-obligation consultation today at 602.870.3230.

Risk Avoidance and What the Heck is Wrong With People?

anger management

I rarely go into Circle Ks or convenience stores or places of that ilk because I’d prefer not to get shot (risk avoidance). However, on the way to a volunteer gig the other day and against my better judgment, I stopped in a Circle K near Interstate 17 in Phoenix to buy a pop (or soda, as some call it). As I walked in, I noticed there was a mop bucket full of black water near the register and that my shoes stuck to the floor as I went to get my pop. As I filled my cup, I noticed a sign that said, “Out of straws.”

At the register I said hello to the cashier and asked the young man if he was holding out and if perhaps he did have a straw. He nearly started crying. He said they ran out of straws earlier in the day and he couldn’t get any from neighboring Circle Ks (franchise issues?). He said that people were so irate that they were dumping their entire sodas on the floor, which he had to clean up.

I asked, “Really, it’s like ‘I hereby dump my soda on the floor in protest because you are out of straws?'” Yes, he responded sadly. He said he had given his two-week notice because he just “just couldn’t take it anymore.”

Wow. Not having a straw for a Big Gulp? Not a rage-o-meter offense, in my humble opinion. Which leads me to today’s topic: “What the heck is wrong with people?” That young man, so traumatized by the day’s events that he quit his job, is a human being. He’s someone’s son, he’s a grandchild, and he’s a human being with feelings. Have we swung so low that we’re willing to dump our sugary sodas on the floor and our rage onto a poor cashier in a convenience store?

Don’t get me wrong. I know that everyone, me included, acts badly from time to time. We lose our temper in traffic, we snap at someone who may only be trying to help us, or we hang up in frustration on a customer-support person. However, for people to stoop this low, to “make a statement” that makes no statement other than they desperately need anger management, to me is simply beyond comprehension.

I have nothing deep and philosophical to say about this except it makes me much more aware that my behavior has consequences. It also reminds me that this type of bad behavior means we as risk management professionals will always have jobs.

I am so grateful that I don’t carry useless, non-specific rage over an imaginary victim status. When a store is out of straws, it isn’t a personal affront to me or an assault by the universe to make my life harder. Apparently, though, that rage is present in and acted on by many.  And that, my friends, is exactly why I stay out of convenience stores. That and Milk Duds. But that’s another story.

Cavalcade of Risk #205

There’s a lot of great news and advice from the risk management front in this edition of the Cavalcade of Risk.

new-risk-manager400
Risk management tips

There’s a lot of great news and advice from the risk management front in this edition of the Cavalcade of Risk. Let’s begin by evaluating the risk that your employer-provided health insurance may soon be a thing of the past. InsureBlog’s Nate Ogden evaluates Ezekial Emmanuel’s dire predictions.

When it comes to worker health and safety, Julie Ferguson of Workers’ Comp Insider says that it may be time to shake up the film industry again. According to Ms. Ferguson, it is no more acceptable for film employers to try to play fast and loose with worker lives than it is for coal mining, manufacturing, or any other industry.  In her post Death on a Georgia Railroad Trestle, she talks about how a recent fatality is sparking calls for safety reforms in the Hollywood film community.

Speaking of worker health and safety, did you know you can probably avoid hiring your next workers’ compensation claim? Much of workers compensation cost containment is related to good information, good systems, and proper planning. When it comes to hiring, it can be staggering to think about the amount of liability a company is taking on with each new employee. When you bring on a new employee, you are also bringing on the liability that they can safely perform their job. Michael Stack at Reduce Your Workers’ Comp blog offers us a few tips.

We always look forward to a glimpse at Bob’s Cluttered Desk, and this month Robert Wilson looks at school shooting drills. States are embracing active shooter drills in public schools, conducting sometimes unannounced drills that simulate an active shooter on campus. In some districts teachers are expected to be shot by pellet guns as part of the training. Is this a good idea, or simply a way to traumatize teachers and their students?

How much does your genetic composition affect the risk you will have a chronic condition?  The answer is not as much as you might have thought. Jason Shafrin of The Healthcare Economist investigates.

With today’s college students frequently graduating with loads of debt, Jon Haver of Pay My Student Loans blog, describes why today’s graduates need to consider life insurance now, not in the future.

Finally, at my Insurance Writer blog, I offer the top ten habits new risk managers should avoid to succeed in their new and often challenging positions. I learned many of these mistakes from first-hand experience.

Dennis Wall is our next host. He has chosen his theme and he is asking for posts related to residential mortgages, force-placed insurance, the participants in the mortgage process, the participants in the securitization of mortgages, and related themes.

Top Ten Mistakes to Avoid as a New Risk Manager

If you’re a new risk manager, these tips can help you transition into your new, challenging role.

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Avoid these mistakes

The transition into your first risk management job can be difficult. Whether your boss promotes you into your first risk management job or hires you from another organization, you want to excel at your new position over the long haul. In part, that means avoiding mistakes, even though we often learn our best lessons when we fail. However, some mistakes can seriously hurt your risk management program, harm your reputation, or even derail your career. Here are ten mistakes you can avoid.

1. Don’t rush in with all the answers. You may arrive wanting to form your own alliances and acquire your own team, but avoid making hasty decisions. Give current employees a chance to prove themselves before you transfer them or hire your own team. The same applies to vendor relationships. You can lose a great deal of historical exposure along with loss history and coverage negotiation knowledge if you immediately decide to switch insurance brokers. “Changing brokers can be a great way to create significant coverage gaps or an errors and omissions claim for your friend the new broker,” according to one Atlanta broker. Some vendor alliances, such as relationships with contractors and body shops, may be long-standing, especially in a small town. Rushing in and making changes can cause big ripples in a little pond.

2. Don’t try to do everything at once. In my teens, I read a book called Ringolevio, about a kid named Emmett Groan growing up in the streets of New York City. One of his compatriots frequently warned Emmett when he was about to rush headlong into a decision, “Take it easy, greasy, you’ve got a long way to slide.” I found that advice very applicable in risk management. If you inherit a big job, you will be faced with hundreds of decisions, some big, some small. Take your time. While you may feel overwhelmed at first, chip away at the organization’s most pressing problems. Put out fires as they arise. Then schedule time for you and your advisers — your brokers, your attorneys, your actuaries, and your managers – to develop sound strategies and solid strategic plans.

3. Don’t use a shotgun, use a rifle. If the organization is experiencing too many injuries, for example, don’t jump to an obvious solution like deciding more personal protective equipment will answer the company’s biggest safety issues. Talk with front-line supervisors, study historical loss data, and consider several options before you throw money at a problem. Once in the door, interview employees, talk with other managers, meet with your vendors, and set a few important priorities for your first six months in the job. Using a rifle approach means you’ll have to say “No” to some people. This can cause problems. When possible, explain why you’re declining to act on the problems or the specific issues others may present to you. The more transparently you operate, the less criticism you will face. Openness reduces speculation and helps avoid resentment.

4. Don’t job hop. Most people can be very ambitious early in their careers. Yet too much ambition can hurt your career. Think long and hard before changing jobs. Bad bosses rarely outlast their employees. Deciding to change jobs because of a conflict with a supervisor is often short-sighted. The grass might seem greener on the other side, but sometimes that’s because of a septic tank (to paraphrase a famous comedian). These questions may help you avoid rash decisions.

  • Am I making the change solely to earn more money or for a more prestigious title? If so, will this change “pay for” what I will lose?
  • Am I making the change because I’m feeling unchallenged or bored? If so, what steps can I take to make my current job more challenging? For example, would becoming more active in a trade association, offering your expertise to a local non-profit, or mentoring an up-and-coming risk management professional add challenge and interest?
  • How will this impact my retirement financially? Will I be changing retirement systems or will I lose significant bonuses or vacation due to the change? Always factor those figures into the salary decision. This question becomes more important as you edge closer to retirement age.
  • How will this change impact my family and my coworkers? Our coworkers can turn even a challenging job into an appealing one. Do you really want to leave your coworkers? As for family, what ages are your children? Disrupting school-aged children can be very problematic and have negative, long-term consequences.
  • What are the odds I will regret this decision? Go ahead, we’re numbers people. Put a percentage to your decision then ask yourself if you’re really ready to take that gamble.

It takes months to settle into a new job. It’s often a year or more before we feel comfortable. Some studies show that many people who change jobs would have done much better if they had stayed put longer. Change for the sake of change frequently is not positive.

5. Don’t entertain gossip about your predecessors. Some at your new organization may try to build an alliance with you at the expense of your predecessor. Short-circuit these conversations whenever possible. Tactfully turn the conversation to another subject or excuse yourself from the conversation. Try not to make an enemy of the person who is trying to get into your good graces.

6. Don’t revisit your predecessor’s decisions. Especially when working with unions, you may find people lined up at your door asking you to revisit your predecessor’s judgments. Unless your predecessor’s conclusions negatively impact your overall program, don’t rush into undoing the decisions and the work he or she completed. You may not be operating under the same set of facts or with the same long-term vision that former risk manager had at his or her disposal.

7. Don’t believe your own PR. Never pretend you know more than you know and don’t start believing your own “press.” While others may soon invite you to participate on panels and present at conferences, remain humble and teachable. It’s terribly painful to learn humility through humiliation.

8. Don’t fail to communicate. A lack of communication is one of the most damaging mistakes a risk manager can make. A risk manager must have the ear of employees across the organization, from line supervisors to senior management. According to Don Donaldson, President of LA Group, a Texas-based risk management consulting group, “A risk manager needs to be an excellent communicator and facilitate his or her message across the entire organization. In my mind, that requires getting out of the office and pressing the flesh; seeing and being seen and listening, really listening, to determine what is going on in the organization.” Management by walking around is one strong tool in a new risk manager’s tool bag. Once people see that you’re willing to leave your office to discover what is happening, whether it’s on the shop floor or on the sewer line, they’ll more readily accept your expertise and counsel.

9. Don’t get discouraged. “New risk managers may make the mistake of thinking that risk management is as important to others in the organization as it is to them,” according to Harriette J. Leibovitz, a senior insurance business analyst with Yodil, Inc. “It takes time, and more time for some than others, to figure out that you’re more than an irritation to the folks who believe they drive all the revenue.” Over time, you will prove your value to the organization many times over. Until that day, quietly do your job and find encouragement from your risk management peers.

10. Don’t forget to laugh. You will be privy to the peculiarities of human nature both at its finest and at its worst, so don’t forget to find the lighter side of situations when you can. A robust sense of humor will help you through the rough spots and build bonds with your coworkers.

While these are just a few tips to help you in your new role as a risk manager, your peers probably can offer many more ways to ensure success. Over my career in risk management, I have found my fellow risk management professionals to be some of the most generous people in my life, always willing to share their expertise and provide me with a helping hand. Develop and lean on your network.

If this is your first job as a risk manager, you’re in for a wonderful experience. Take time along the way to enjoy the experiences, appreciate the great people you will meet and appreciate the lighter side of risk management.

How Long Should Sentences and Paragraphs Be in Business Writing?

As agents, consultants and claims people, we should write in top form before we send that letter or publish the final draft of our blog. Here are a few tips on sentence and paragraph length.

There is a lot of poor writing out there on the web. Even in professionally written White Papers and blog entries, there is lots of room for improvement. As agents, consultants and claims people, we should write in top form before we send that letter or publish the final draft of our blog. Here are a few tips on sentence and paragraph length.

The “eye likes white space.” If you mail a letter or publish a blog without adequate paragraph breaks, readers will quickly lose interest. Creative use of white space encourages the reader to dig in and begin reading, then refuses to intimidate the reader along the way.

How long is a sentence?

Most writing experts agree – use concise sentences in business writing. Strive for an average of 15-to-20 words in even the most technical documents. However, good writing uses varied sentence length. If you write all 10-word sentences, your work would be choppy. If you use all 20- or 25-word sentences, the reader will soon lose interest. Vary sentence length and strive for an average of not more than 20 words per sentence. Briefer is better. A four-word sentence that is informative is perfectly acceptable. “Risk management maximizes profits” speaks volumes in four words.

How long is a paragraph?

A paragraph is a relatively short block of text that opens with a statement—a topic sentence—which describes what the paragraph contains. Many writers, even experienced ones, tend to stray toward lengthy paragraphs. This is a mistake. Strive to average less than 100 words per paragraph. Also keep formatting in mind, because if you format using more than one column per page, your paragraphs should be even shorter.

Remember these three rules for better business writing:

1.       The eye likes white space

2.       Sentence length average: 15-to-20 words maximum

3.       Paragraph length average: Less than 100 words

What Does 2014 Hold for Insurance Rates?

With 2014 rapidly approaching, contact your broker or consultant now to discuss steps you can take to reduce your 2014 commercial premiums.

What can you expect for property and casualty insurance pricing in 2014? Expect some increases, but watch for significant decreases in at least one line of insurance. According to Willis’s recently published Marketplace Realities 2014, new capacity is flooding the market from “as widespread as China and Omaha.” New capital supply offers a more “inviting marketplace,” Willis executives believe. Others insurance experts across the U.S. agree. Here is what to expect in 2014.

Primary and Excess Casualty

Do not expect huge decreases in casualty prices even with “abundant” capacity and “new market entrances,” according to Willis and other experts. With the loss of the federal terrorism backstop looming in December 2014, carriers hesitate to write exposures with large risk concentrations. Underwriters are also avoiding manuscript endorsements, relying more heavily on Insurance Services Office (ISO) language. Standard ISO language has more court decisions behind it, which equates to more predictable loss experience for underwriters to base their rates, many believe. Willis predicts casualty pricing to increase two to 10 percent in 2014.

Auto and Fleet

Auto liability continues to challenge fleet owners nationwide. Experts predict auto liability pricing increases between two to 10 percent. Underwriters are imposing higher retentions on risks with large fleets, heavy trucks or poor loss experience. Carriers like ACE offer auto liability buffer limits, coverage outside the working layer when primary limits do not meet umbrella attachment points.

Workers’ Compensation

There are several emerging issues in workers’ compensation. With the Affordable Care Act expected to bring new insureds into the healthcare system, expect strains on the work comp system. This will put pricing pressure on workers’ compensation premiums. While experts predict that earlier treatment for comorbidities will benefit workers’ compensation experience, we predict this will be a long-term benefit. In the near term, Willis predicts work comp rates will increase from 2.5 to 10 percent. The exception is California, where employer can expect rate increases of up to 20 percent.

Employment Practices Liability (EPL)

Adverse claims experience is placing upward pressure on EPL coverage. Entities domiciled in certain California counties may find themselves unable to obtain coverage, Willis predicts. While overall capacity remains “abundant,” there are no new EPL carriers entering the market. Pricing overall will be flat to a 10 percent increase, with private, nonprofit and smaller employees predicted to face up to 15 percent increases. The Equal Employment Opportunity Commission continues its aggressive enforcement plan despite some staggering trial losses for the EEOC in 2013. There is no time like the present to explore ways to decrease your EPL risks and avoid EEOC scrutiny.

Cyberrisk

When Cyberrisk gets its own page in a white paper discussing rates, you know it is a hot topic among insurers and risk managers. There were more than eight hacking incident per day in the US in 2012 according to the report. With increased security concerns, coverage is now a “must have” for many organizations. Calling the market for stand-alone Cyberrisk “active,” Willis predicts rates will remain competitive. If your firm has had losses, however, Willis predicts slight changes — between -two to five percent overall. There are many new Cyberrisk buyers in the marketplace and pricing for first-time buyers remains competitive. If you outsource your data to cloud vendors, underwriters will review your existing contracts. Your indemnification language will be a critical factor in underwriting your risk.

Directors & Officers (D&O)

Price increases are moderating with pricing expected to be flat to a high of 20 percent for financial services firms. Homeowner and condominium associations as well as educational institutions should expect premium increases. One carrier has indicated a willingness to provide “mega limits” for Side A coverage, which protects executives against claims not indemnified by the corporation. The non-traditional money that is now flooding the insurance industry may lead to downward pressure on D&O pricing in 2014, Willis contends.

Property

We saved the best news for last. With loss ratios hovering between 75 and 85 percent for many property insurers, Willis and other insurance experts predict a big decrease in property insurance pricing. In non-catastrophe exposed risks, expect a 10 to 12.5 percent decrease in pricing. For cat-exposed property, Willis predicts smaller decreases of between five to 10 percent. Any port in a storm, right?

With 2014 rapidly approaching, contact your broker or consultant now to discuss steps you can take to reduce your 2014 commercial premiums.

Cavalcade of Risk #192 Gallops Into View

Cavalcade of Risk #192 gallops into view with some interesting risk-related posts and great advice from various risk experts in their specific fields, from life insurance to enterprise risk management.

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Excuse the slightly tongue-in-cheek lead-in, because this week’s Cavalcade of Risk is full of great risk management information. We visit a variety of risk management experts for their take on current events impacting their practices. Take a few minutes, grab a cup of coffee and visit and interact with our contributors.

In this post, Dr. Sidorov looks at a recent scientific study that examined national insurance data to determine what happened to the commercial health insurers in the wake of the Obamacare rule that they spend at least 80 to 85 percent of their income on medical care. It turns out that the most vulnerable part of the health insurance market-individual insurance-saw a decrease in profitability.

Jeff Rose helps us through the maze of medical conditions that can limit your ability to buy health insurance in his post. If you have an aortic valve disorder like aortic stenosis or aortic insufficiency, these conditions will impact you when you apply for life insurance. Insurance companies are very cautious about aortic valve disorders because of their potential to cause serious heart problems. There is hope, however. Jeff informs us you can still get insurance despite your condition. It really depends on a few factors, including the seriousness of your condition. To get a better idea of what to expect, read his guide to insurance underwriting for aortic valve disorders.

Here’s a news flash: If you are uninsured, there is a risk of being overcharged for hospital services. In California, the risk is 0. Jason Shafrin of The Healthcare Economist explains why here.

Recently, there have been some remarkable changes in how life insurance is now underwritten, including the use of social media and new technology. Henry (Hank) Stern of InsureBlog has the details.

Julie Ferguson of Workers’ Comp Insider isn’t talking scratch when she asks: “How much risk do you want to take with your kids’ chicken nuggets?” Chickens are on the front burner on the legislative circuit lately with the USDA seeking to overhaul poultry processing regulations that many see as unsafe for workers. But Julie notes that there is more than just worker safety at stake. Read her fast take on fast food here. I would have said, “Winner winner; chicken dinner.” Except after reading her post, and watching the video, I may go vegan. Soon.

David Williams of Health Business Blog says that a patient advocate tells him that it’s “dangerous” to rely on online doctor ratings and reviews and to rely on the “facts” instead. David argues that the case against reviews is seriously overrated and the proposed alternative paths are not as promising as they sound. Read his comments here. I have to admit, I’m a big believer in Yelp and a frequent Yelper myself. I don’t go out to dinner without checking Yelp, let alone try to find a service provider, doctors and dentists included.

Here are some closing thoughts from yours truly regarding the trends I and other risk management experts throughout the US are currently seeing.

  • Enterprise risk management is becoming increasingly important to organizations.
  • Jury verdicts continue to rise. Check your liability limits and double check your policies to determine if you have defense inside or outside limits. Most professional liability policies provide defense within limits, and defense costs can erode your limits significantly.
  • Workers’ compensation costs have moderated in a few states; however, don’t expect to see rates decrease anytime soon, like never. Medical costs continue to escalate nationwide, outstripping wage loss benefits paid.
  • Cyber risks continue to be the bane of businesses at home and abroad; however, hackers increasingly target small-to-medium sized businesses because they seem to provide the path of least resistance to hackers.
  • Commercial insurance prices increased by six percent in the second quarter of 2013, the 10th consecutive quarter of price increases, according to a recent survey conducted by Towers Watson. Now is the time to bulletproof your risk management practices and consider increasing your deductibles or taking higher self-insured retentions.

This does it for another edition of Cavalcade of Risk.

Beware of Pumping and Pedaling

There are many things people do wrong when driving. How can you stress the importance of safe driving to your employees? Here are a few tips.

While trying to mind my own business as I was getting my nails done this week, three young gals who had just had babies came in for a pedicure and sat right behind me. They talked for about twenty minutes about breast milk pumping. One complained about finding the time to pump. “How long is your commute?” one asks the time-strapped mother. “15 minutes,” she answers. “Oh, that’s not long enough to pump,” the advisor said.

“I want to read that police report,” I said to the gal doing my nails. A woman sitting a few chairs away said to me, “Oh, they do it all the time,” meaning the young women who breastfeed, I guess.

Something Tells Me It’s All Happening At the Zoo

Then the gal with time constraints said, “Well, we’re going to the zoo tomorrow, so I can do it then.” I couldn’t resist, at that point, not knowing if she meant she would pump while she walked among the giraffes or on the trip there, so I said, “Well, at least you’ll be among mammals.” They didn’t find that amusing.

I posted this conversation on my Facebook page because I found it so amusing and completely bewildering. The comments I received made me realize: pumping and pedaling is not an anomaly. One gal told me her friend’s daughter told her teacher she wanted to be when she grew up, “Just like my mom. She can breastfeed the baby, eat a hamburger, and drive with her knee, all at the same time.”

What Else Goes Wrong Behind the Wheel?

So if your employees are pedaling and pumping, I wondered what else they might be doing behind the wheel that might impact the small business owner. Since I’ve been out of front-line claims handling for a number of years, I decided to ask some of my friends who handle claims. Here are some things they find in police reports as they investigate claims.

  1. In a long-haul trucking accident that involved fatalities, the truck driver was reviewing pornography as he drove. He drove over the top of another vehicle, resulting in several fatalities.
  2. Shaving and driving are frequently reported.
  3. One adjuster reported his insured activated cruise control in a recreational vehicle then headed for a nap.
  4. Reading at stop signs is a frequent problem in accidents.
  5. Eating behind the wheel also contributes to many accidents.

How to Avoid Pumping and Pedaling and Other Unsafe Driving Habits

There are many things people do wrong when driving. How can you stress the importance of safe driving to your employees? Here are a few tips.

  1. Set the expectation at employee orientation that safe driving, whether at home or at work, is critical to job performance. How employees drive in their own vehicles is a direct indicator of how they will drive yours.
  2. Put safe driving reminders in pay stubs from time to time.
  3. Have employees sign a form when they use a pool car that clearly states they will wear their seat belts and obey all rules of the road.
  4. Let all employees know how much accidents cost your company. While you don’t have to identify the employee who had the accident, in your next meeting, for example, tell employees, “The accident where we rear-ended another vehicle cost over $120,000 to settle.” Employees understand money.
  5. Hold employees accountable for at-fault accidents. Make it clear in your personnel policies that any failure to work safely, including driving safely, can mean discipline up to and including termination.

Know Your Employees’ Driving Habits

From time to time, ride with your employees. Do they tailgate? Do they chat more than they drive? If so, a company-wide driver training may be in order. National Safety Council offers driver training in most states. One auto accident can devastate your loss history, so money spent to prevent auto and other accidents almost always pays for itself.

In the case of breast-pumping and driving, I cannot even fathom how to avoid this exposure. Perhaps your female managers who have had children can take your lactating Madonnas aside and offer some advice. Good luck with that.

Risk Management Challenges in 2011

What will keep risk managers on the edge of their seats in 2011? As the year begins, here are some top worries of risk managers in the United States.

What will keep risk managers on the edge of their seats in 2011? As the year begins, here are some top worries of risk managers in the United States. Read my latest column in Allbusiness here.