Risk Scenario

The Best Intentions

Construction executives let their emotions get the best of them after an onsite death, with dire policy consequences.
By: | November 3, 2014 • 7 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Water Everywhere

Workers with the O’Hanlon Construction Company are used to seeing the white pickup truck with the green municipal seal driven by Yakima County code inspector Ty Davis on the job site. Davis is a 25-year veteran of the position. So when Davis drives up to the site of a municipal tunneling project being run by O’Hanlon, no one is particularly surprised or concerned.


Affable, fit and seemingly inseparable from his mobile device and a Styrofoam cup of coffee with cream and sugar, Davis made his way from the pickup truck, waving a friendly hello to the foreman on the job, Hector Lopes.

“Hector my man, how are we today?” said Davis, walking up to the where Lopes was overseeing a crew of three that was building the forms to lay an asphalt hiking and biking path on the floor of the tunnel.

“I’d be a lot better if those Seahawks would play some run defense,” said Lopes, pausing from his work to shake Davis’ hand.

“Ahh, they’ll get it together, it’s early yet,” Davis said.

Davis nods to the crew doing the concrete work in the tunnel.

“How’s it goin’ down there?” he asked.

“Oh, it’s goin’,” said Lopes. “The rain ain’t helpin’, but we’re trying to get it done on time.”



“You mind if I go down and have a look?” said Davis.

“Sure thing,” said Lopes. “It’s break time, anyway.”

“Hey guys!” Lopes called to the crew. “Break. Ty’s comin’ down for a look, too.”

The crew complied, following Lopes up to the food trucks across the street.

Davis walked carefully down the existing bike path to the tunnel floor. Lopes no sooner got to the other side of the street when a horrendous noise shattered the calm of the morning. Lopes sprinted back to the site and couldn’t believe what he saw when he looked down to the tunnel.

“Ty!” Lopes screamed.

A portion of the tunnel wall had given way, burying Ty Davis under two tons of concrete, mud and water.


John O’Hanlon, the son of the company founder and a close friend of Ty Davis, was overwhelmed by Davis’ death. Even though the culpability for a faulty soil analysis could lie with many parties, O’Hanlon felt he must formally communicate his grief and his commitment to do the right thing by sending an e-mail to county officials.

“We will do everything in our power to see that Ty Davis’ family is provided for,” the e-mail read, in part.

“Words cannot express my shame and horror that mistakes our company made played a part in the death of my beloved friend,” the distraught e-mail concluded.

The same evening the e-mail is received, the head of the Yakima County Board of County Commissioners was interviewed on television saying that executives with long-time county contractor O’Hanlon Construction Company were devastated at their “failure” and had vowed to do what they could to make things right.

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Excuse Me?

Sharon Holmes, the retail broker with whom O’Hanlon placed their professional liability coverage, was working on a renewal when something she saw in her e-mail inbox caused her to stop. It was a construction risk newsletter that contained news of the latest legal findings, settlements and other developments in the construction risk management world.


“What?” Holmes said as she clicked on the e-mail, her attention having been caught by the word “O’Hanlon” in the subject line.

“Contractor admits fault in death of county employee …” Holmes said, reading aloud.

“They can’t be serious,” she said out loud, reaching for her phone and hastily dialing a number.

“John, it’s Sharon Holmes,” Holmes said.

“I’m sorry … who?” John O’Hanlon said.

“Sharon Holmes, I’m your professional and general liability insurance broker,” Holmes said after a pause.

“Oh … yeah … what can I do for you, Sharon?” O’Hanlon said.

“What you can do for me …” Holmes began, and then stopped herself from saying something she might regret.

“Ummm …” she said, collecting her thoughts.

“John, I’m looking at an industry newsletter in my inbox that refers to you making a statement to public officials that seems to take responsibility for the death of a code inspector at one of your job sites.”

“Huh? Well, yeah. I had to say something, Ty was my friend. We’ve been working with Yakima County for more than 20 years,” O’Hanlon said.

“John, that may be true, but I wish you had consulted with me before you made any statements,” Holmes said.

“The truth is the truth, he died in our tunnel,” O’Hanlon said.

Holmes again composed herself, seeking the right delivery.

“John. I’m sorry you lost a friend. I’d be upset too if I lost a friend. But I need to meet with you and Billy [O’Hanlon, John’s brother and the company CEO] on this. We need to go over the insurance coverage implications as soon as possible.”

“Well, Ty’s funeral is today, so today is out,” O’Hanlon said.

“Tomorrow then, can you do it tomorrow?” Holmes asked.

“Sure … tomorrow,” O’Hanlon said weakly.

Holmes hung up with O’Hanlon and immediately dialed the Seattle offices of a major national construction risk carrier.

“Hey, Brian, it’s Sharon Holmes.”

“Hey Sharon, I had a feeling I’d be hearing from you this morning,” said Brian Snyder, the regional claims executive for the carrier.

“So you saw it,” said Holmes.

“Yep. Just hit my inbox this morning. I can check the policy … as can you … but I’m pretty sure what it’s going to say,” Snyder said.

“We go four days without being notified of a job site death, I’m pretty sure coverage will be denied,” Snyder said.

“I’ll check the policy,” Holmes said weakly.

“Suit yourself. Sorry about this,” Snyder said in conclusion.

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A Direct Hit

Ty Davis’ widow and children filed a lawsuit against O’Hanlon Construction, Yakima County and three subcontractors alleging that their failure to conduct competent soil testing resulted in the inspector’s death.


An investigation commissioned by the Davis family concluded that the soil study ordered by O’Hanlon on behalf of the county failed to take into account possible shifts in the water content of the project soil due to variations in rainfall and the municipal water table.

Upon notice of the lawsuit, O’Hanlon’s carrier told the company that it had no plans to provide for the company’s defense. A recorded, broadcast admission of guilt and a failure to notify the broker or the carrier in a timely manner effectively voided the company’s professional liability coverage, said the carriers’ attorneys, in a letter to Sharon Holmes and the O’Hanlons.

“We should sue them! How were we supposed to know?” Billy O’Hanlon said to his brother John, after the grief of Ty Davis’ death faded and they started taking a more pragmatic assessment of their situation.

“Besides, being transparent in our dealings with the county has been a hallmark or our relationship. There’s no value in that?” Billy thundered.

At his older brother Billy’s urging, John O’Hanlon called Sharon Holmes and broached the topic of O’Hanlon disputing the carrier’s refusal to pay for a legal defense.

“I don’t see how you could win, and I think you’d be throwing good money after bad,” Holmes said.

“I strongly advise against it. I’m not trying to be harsh, John, but you should not have said what you said without A, talking to me or B, talking to an attorney,” Holmes said.

O’Hanlon’s attorneys mount a game defense, pointing to the contractor’s long, and nearly blemish-free service record with the county and good documentation of transparency being a hallmark of the company’s business dealings.

All to no avail.

A jury found O’Hanlon, the three subcontractors, and the county liable for the death of Ty Davis to the tune of $8 million in loss of income, pain and suffering.

O’Hanlon, which thought it was doing the right thing by apologizing, and was the only entity to apologize, is the only defendant uncovered by insurance.

O’Hanlon is out of pocket to the tune of $4 million, not including court costs.

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Risk & Insurance® partnered with XL Group to produce this scenario. Below are XL Group’s recommendations on how to prevent the losses presented in the scenario. These “Lessons Learned” are not the editorial opinion of Risk & Insurance®.

1. Contact your broker first: At the first sign of trouble on any project, promptly contact your broker to report the circumstance. Late, or non-reporting of an incident, large or small, can result in your Professional Liability coverage being denied.

2. Be mindful of your actions post-incident: Understand that taking actions to explain, admit fault, mediate, finger point, or recommend fixes or alternatives to a circumstance prior to notifying your broker may also result in your coverage being denied.

3. Have a communication plan: Create a circumstance reporting protocol within your organization to be followed by all employees, including designating a “quarterback” to coordinate external communications.

4. Align your philosophy with your coverage: Ensure your own best practices are not in conflict with the terms of your insurance coverage.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

Employment Practices


Sexual harassment is a growing concern for corporate America. Risk managers can pave the way to top-down culture change.
By: | March 5, 2018 • 12 min read

The #MeToo and #TimesUp movements opened up Pandora’s Box, launching countless public scandals and accusations. The stories that continue to emerge paint an unflattering picture of corporate America and the culture of sexual harassment that has permeated it for decades.


“The clock has run out on sexual assault, harassment and inequality in the workplace. It’s time to do something about it,” reads the official tagline of Time’s Up, one of the most vocal groups demanding change.

The GoFundMe campaign that supports the Time’s Up Legal Defense Fund raised more than $16.7 million in less than a month, making it the most successful GoFundMe initiative on record.

Funds will be used to help victims of sexual harassment and assault bring legal action against harassers, as well as provide public relations consultation to manage any media attention such suits might attract.

The problem was never really a secret.

In surveys conducted since 1980 by the U.S. Merit Systems Protection Board, 40 percent of women and 15 percent of men consistently reported being sexually harassed at work.

In a sweeping meta-analysis of 25 years’ worth of research data, published in “Personnel Psychology,” an average of 25 percent of women reported experiencing sexual harassment at work. When respondents were given clear definitions of harassing behavior, that figure shot up to 60 percent.

The current climate is just now pushing awareness to the forefront. It was reported last November that law firms in the nation’s capital are seeing a spike in inquiries about sexual harassment cases.

Laura Coppola, regional head of commercial management liability in North America, Allianz Global Corporate & Specialty

In addition, the Equal Employment Opportunity Commission (EEOC) website is seeing visits to its harassment web page double.

There’s no question the costs to businesses can be staggering. Twenty-First Century Fox reportedly incurred $50 million in costs tied to the settlement of sexual harassment and discrimination allegations in its Fox News division, as well as a $90 million settlement of shareholder claims arising from sexual harassment scandals.

In June, the company disclosed in a regulatory filing that it had $224 million in costs during the fiscal year related to “management and employee transitions and restructuring” at business units, including the group that houses Fox News.

If time is indeed up, it won’t just impact Hollywood, Silicon Valley or Capitol Hill. It will impact every workplace, in every industry.

“It affects everybody,” said Marie-France Gelot, senior vice president and insurance & claims counsel for Lockton’s Northeast Claims Advisory Group.

“I think anybody in corporate America — at some point — has seen it or been aware of it or been around it.”

“This particular phenomenon is certainly at a much wider scope than we’ve seen in the last decade or so,” said Laura Coppola, regional head of commercial management liability in North America, Allianz Global Corporate & Specialty.

“This is going to touch many industries, many segments, and many people.”

Employers are beginning to wonder if their workplace could be next.

“I think if you’d been asking [insureds] a year ago, ‘Are you interested in hearing about sexual harassment prevention?’ I think the answer would have been, ‘No, we’re good, we’ve got it,’ ” said Bob Graham, vice president, HUB International Limited.

“But I think now everyone’s saying ‘Sure, yes, we’d like to hear something.’ ”

Leading the Conversation

As American workplaces come under increasing scrutiny, the time is ripe for a large-scale pivot in the way employers manage risks related to sexual harassment.

The co-chairs of the EEOC’s select task force on the study of harassment in the workplace expressed it aptly in 2016:

“With legal liability long ago established, with reputational harm from harassment well known, with an entire cottage industry of workplace compliance and training adopted and encouraged for 30 years, why does so much harassment persist and take place in so many of our workplaces? And, most important of all, what can be done to prevent it? After 30 years — is there something we’ve been missing?”

Experts in the management liability field unanimously told Risk & Insurance® these issues should be elevated to the board level and the C-suite.

“Just as cyber liability shifted rapidly from an IT discussion to a board level discussion, so too will the harassment and discrimination discussion go beyond HR and be elevated to the highest levels,” said Coppola. It will become a corporate-wide, enterprise-wide conversation.

“It’s going to take some time to get to that board level, but it’s going to have to happen,” said Paul King, national practice leader, management and professional services, USI Insurance Services.

“Risk management and HR cannot go down parallel paths, not understanding one another. Not anymore. There’s too much at stake.” — Paul King, national practice leader, management and professional services, USI Insurance Services

Risk managers, said Kelly Thoerig, U.S. employment practices liability coverage leader, Marsh, are well suited to lead this conversation, which means actively partnering with human resources, the legal department, the general counsel’s office and outside counsel.


“Just like the quarterback depends on the offensive line, on receivers, on the running backs, it’s not a one-man show,” said King. “This can’t be the risk manager operating in a vacuum; they have to be liaising with multiple parts of the organization.”

Added King, “Risk management and HR cannot go down parallel paths, not understanding one another. Not anymore. There’s too much at stake.”

Connecting with outside counsel can also be of great benefit to risk managers, said Coppola.

“[They can] provide a very independent objective view of what they see in the overall market and how their knowledge of the individual client’s best practices can be improved and enhanced to ensure that they are protecting employees and the organization.”

Brokers and carriers also may be able to offer insights and services. Unfortunately, that piece is often lost because risk management and HR are siloed.

“The [knowledge of the] services that come with the insurance policy end up with the policy — in a drawer in the risk manager’s office,” said Tom Hams, employment practice liability insurance leader, Aon.

“HR doesn’t know that they exist. Even if they’re just online blogs or something like that, they could be more meaningful to the HR department than they are to risk management.

“So it’s important to make sure that companies are aware they’ve got those tools and — more importantly — to share them internally.”

Expediting Cultural Change

The X factor that underpins every aspect of these efforts is culture, experts agreed.

“It’s not so much ‘does the company have best-in-class policies and procedures in place;’ I think many of them do. I think that a significant change needed is doing a full overhaul of corporate culture, and that’s no small feat,” said Gelot.

Paul King, national practice leader, management and professional services, USI Insurance Services

True culture change can only come from the top level. But that isn’t likely to happen unless everyone at the top understands what the scope of the exposure could be if it’s not addressed appropriately on the front end. And for that, money talks, said Thoerig, who will be presenting on the topic at RIMS 2018 in San Antonio.

“Nothing is more instructive than real tangible claims examples and settlement amounts. Arm yourself with … recent, relevant claims examples specific to the industry and the jurisdictions the company operates in.”

In addition, said King, HR and legal should be regularly feeding claims information to risk managers to share at quarterly meetings of the board and give specific updates around these issues.

Armed with that level of intelligence, top brass can set the goals that will drive all anti-harassment efforts, said experts, putting an emphasis on identifying and correcting behavior that could potentially expose a company to liability.

Better Training and Reporting 

The best anti-harassment programs are multilayered, said Hams, with each facet carefully tailored to suit the employee population, the industry and the organization’s goals. A clearly defined policy is essential, stating that harassment will not be tolerated and neither will retaliation against those who report it.

The policy should be clear that employees are expected to report harassment or unacceptable behavior. Hams said he’s seen companies go so far as to state employees who don’t speak up are in violation of the policy.

“At least it should give them pause to stop and think about what they might have seen before they click the button or sign the document,” he said.

Companies should consider how uncomfortable employees may be about speaking up. An open-door policy is a start.

But there should also be multiple reporting points throughout the organization, said Hams, and an anonymous hotline for those reluctant to bring the matter up with anyone in their chain of command, and a multilingual hotline as well.

An effective training plan will have multiple moving parts and should touch every level of the organization from the executive suite to managers and supervisors to the rank and file. Comprehensive training is especially critical for the managers and supervisors who might receive or investigate complaints.

Many large employers already have training programs that can be considered best-in-class. Small to midsized employers, however, may still be using the cookie-cutter compliance-centric training that has dominated the field for decades.

The goal of this training is to hit all the bases related to Title VII of the Civil Rights Act, ticking off a list of acts or speech that would be considered illegal and affirming the company will not tolerate illegal behavior.

Overwhelmingly though, this type of training misses the mark. Studies have shown that this one-size-fits-all training is ineffective, especially when it’s a rote check-the-box exercise. Employees get the message their employer doesn’t take the subject too seriously.

Worse, it can even aggravate tensions, creating more discriminatory behavior from men who avoid working with women just to eliminate the chance of being accused of anything.

One study even found that men were more likely to place blame on the victim of sexual abuse after they’d received that type of anti-harassment training.

Even at best, compliance-centric training will still fail, because it only addresses behaviors that violate the law. But there is a broad array of behavior that — while not quite illegal — shouldn’t be tolerated.

When this kind of activity is allowed to flourish unchecked, the environment becomes increasingly toxic for those on the receiving end. It also tells employees that the company will tolerate harassment as long as it’s not overly egregious. In that case, it’s just a matter of time before the company is faced with a serious claim.

“Nothing is more instructive than real tangible claims examples and settlement amounts. Arm yourself with … recent, relevant claims examples specific to the industry and the jurisdictions the company operates in.” — Kelly Thoerig, U.S. employment practices liability coverage leader, Marsh

In its 2016 report, the EEOC’s harassment task force recommended changing tactics, exploring alternative training models such as respect-based civility training — what some call professionalism training.


The theory is “if you train them to act in a professional manner, these things tend not to happen at all,” said Hams.

The EEOC also suggested bystander intervention training, which is designed to empower employees to intervene when they witness harassing behavior.

Experts agreed whatever training programs or modules a company chooses, it’s important the training material reflect the workforce and be continuous and regularly refreshed.

A certification scheme also should be put in place to ensure the training is hitting the mark. While the law does not yet require companies to prove the effectiveness of their programs, some suggest it’s only a matter of time before the courts catch up to the problem.

What’s more, said Coppola, it’s simply the right thing to do for companies that want to confirm they’ve created a culture where all employees can expect to be treated professionally.

Zero Tolerance

Gelot and others believe a zero-tolerance policy should be a key component of an effective anti-harassment program.

“There are many companies that have Harvey Weinsteins and Matt Lauers and Kevin Spaceys working in their midst and those people are tolerated. Employees know about them — it’s not a secret.”

Bob Graham, vice president, HUB International Limited

Particularly when the harasser is a high-level executive, companies may wrestle with the decision to look the other way or lose a key rainmaker. In a zero-tolerance environment — one that starts at the top — the decision would be clear.

“What we saw with Matt Lauer and Charlie Rose — they were terminated immediately as the accusations came out. That’s zero tolerance. That’s sending a message to all of the employees within the company that this is completely unacceptable, we won’t tolerate it, and [it] clearly sends a message to the public at large.”

Employers should promote a workplace culture where all forms of harassment and discrimination are unacceptable and reportable, said Gelot. That’s the only way to take the fear and the stigma out of reporting.

That said, the EEOC offers a word of caution on zero-tolerance policies applied militantly without regard for common sense. Employers should hash out the specifics of which acts merit immediate termination versus a warning.

Overzealous application of the zero-tolerance doctrine can backfire if an employee fears her coworker’s children will go hungry if she reports his lewd or sexist jokes.

Creating a Dialogue

As with managing any other exposure that touches everyone, robust sharing of ideas and best practices has the power to improve the risk profile of entire industry sectors.

Facebook raised eyebrows in December, making public its sexual harassment policy in full.

“I hope in sharing it we will start a discussion, both to help smaller companies thinking about this for the first time, and to improve our own practices by learning from other companies,” wrote Lori Goler, Facebook’s global VP of people, about the company’s bold move.


That level of disclosure is making some risk professionals uncomfortable. But others acknowledge the wisdom of it.

“Any time you can share best practices that’s probably a great idea, because no one has all the answers … or at least not all the right answers,” said Graham.

“There’s a reason they did that, and I think it’s for all the right, positive reasons. They want to drive the momentum that is going to reduce or even eliminate what we have seen in corporate America over the last 50-plus years. They want to lead by example, they want to be the model and rightly so,” added Coppola.

“I think we are at a perfect time in our economic environment that allows the evolution of equality in our workplace.”

Part of that should involve making the workplace more egalitarian, said Gelot, and figuring out “how to make female employees not feel ostracized by a ‘boys’ club’ atmosphere, and actively championing the ascension of women into senior rolls.”

“We can’t focus on the past,” said Coppola. “But we can work very hard collectively as a community, and within the insurance industry specifically, to move forward.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]