The plethora of active shooters in U.S. cities this year has adversely affected a store, festival, university, synagogue and many others.
Will your Bakersfield location be next?
Mass shootings cause not only deaths and injuries, they also cause major property damage and legal expenses.
Traditional risk management works not only for “normal” risks but also for active shooters.
To manage this risk, you need to effectively conduct the three processes within a risk management system. They are:
• Risk identification and measurement
• Risk reduction and control
• Risk transfer and assumption
Risk Identification and Measurement
Most of us immediately identify “liability to third parties.”
This includes significant defense costs incurred to prove your organization was NOT legally liable for the terrorism.
Measurement of liability risks is usually shown as “unlimited.”
A business owner generally is not liable to anyone injured by the criminal acts of a third party, unless the criminal act was foreseeable.
As mass shootings become more commonplace, it’s possible the current perception of such events as unforeseeable may begin to shift.
Many of us (including the media) overlook multiple property risks.
They can include:
• Property damage to buildings and their contents
• Business interruption
• Extra clean up expense
• Additional security upgrades
• Crisis management
• Event cancellation
Property losses are more definitive than liability risks, e.g., replacement cost (before depreciation) of buildings, equipment, inventory, etc.
Income is measured in terms of net profits that otherwise would have been earned, plus expenses that continue even though operations are shut down.
Risk Reduction and Control
The federal government has enacted at least two laws to mitigate — if not eliminate — this risk for certain business owners.
In 2002, the SAFETY Act — Support Anti-Terrorism by Fostering Effective Technologies Act — was passed to ensure that organizations would not be deterred from using technologies that could help protect the public.
A prevalent example is a system of metal detectors at the entrance to any event.
All such systems help; none are perfect.
The shooter in Gilroy was able to cut through fencing to enter.
Yet such systems are essential.
The recent addition of metal detectors at Bakersfield’s Convention Center and the Kern County Fair are good examples.
Community leaders must create a collaborative to eliminate this risk through early intervention and prevention.
Bakersfield and Kern County seem to be headed in that direction in their elimination of homelessness.
It would be so easy for that collaborative simultaneously to discover and redirect potential active shooters to a more constructive life.
In 2005, Congress enacted PLCAA — Protection of Lawful Commerce in Arms Act — to ensure manufacturers and sellers of firearms and ammunition are nor “liable for the harm caused by those who criminally or unlawfully misuse firearms.”
There are exceptions, e.g., “negligent entrustment” and knowingly a state or federal statute.
Risk Transfer and Assumption
Risks are transferred, not eliminated, when an insurance policy is purchased.
Risks also can be transferred to others by a hold harmless provision in noninsurance contracts. Risks can be assumed either in full or in part (with deductibles and self-insured retentions.).
All insurance policies are required to include terrorism coverage through a federal reinsurance program called Terrorism Risk Insurance Act.
Otherwise, terrorism would be expressly excluded.
It’s a commercially uninsurable risk. Our federal government can accept this risk transfer using our tax dollars to fund what would bankrupt commercial insurers.
A premium is charged but coverage is contingent on the U.S. Treasury Secretary certifying an act as a terrorist act.
Any single year is limited to $100 billion in losses, so there is a “cap” beyond which even Congress is unable to go in accepting this risk transfer.
Because of these limitations, the private market is beginning to respond to this need in a creative manner.
One popular example is a policy from Lloyds of London that offers these specifically listed (not “all risk”) calculable coverages:
• Legal liability (excluding those covered by TRIA)
• Victim coverages (psychiatric care, medical or dental care; rehabilitation, death benefits, etc.
• Business income (business interruption) and extra expense
• Public relations and crisis management
• Employee counseling
• Additional temporary security measures
If your location or event is conceivably within the scope (no pun intended) of an active shooter’s site selection, ask your broker for a proposal of this coverage.
Then you should be well-positioned to determine the best steps to measure, reduce and transfer this horrendous risk.
Doing so, you’ll enjoy a major benefit of sound risk management — a quiet night’s sleep.