Travel Risk

Duty of Care in a Perilous Age

As risks grow globally, companies must increase focus on the perils that may face their employees abroad.
By: | June 1, 2017 • 6 min read

Political risk and terrorism are on the rise, and so is the responsibility of all companies and organizations to make sure that their most treasured asset, their employees, are safe when they travel.

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Risk consultants and insurers warn that now more than ever employers must make their best efforts to guarantee the physical and mental integrity of staff members and their dependents in foreign jurisdictions. Failing to do so can result in litigation in the U.S. and other countries alike, not to mention the potential of harm to valuable human resources.

U.S. safety and workers’ comp laws do not explicitly impose obligations on companies to guarantee the safety of employees sent abroad. Nonetheless, courts typically acknowledge duty of care obligations, resulting in high compensation for stakeholders that suffer harm while working abroad.

“OSHA has guidance for traveling employees, but the regulatory environment stops at the borders of the U.S.,” said Hart S. Brown, vice president of organizational resilience at Hub International. “Even then, companies are exposed to significant liabilities when their employees are traveling abroad for work.”

Hart S. Brown, vice president of organizational resilience, Hub International

The lack of specific legislation about the issue could actually make it more likely that litigation will take place, according to law office Fisher Phillips. In a recent report published by International SOS, the firm noted that, if an employee suffers some kind of injury abroad, he or she is left with little alternative but to pursue legal redress by alleging that the company was negligent towards its duty of care obligations.

Brown said researchers have found that four out of every five business travelers believe their companies are responsible for protecting them throughout their travels, and a large share of them would consider suing if an adverse event occurred.

Once the decision to litigate is made, employees and their lawyers can shop around to find the most favorable jurisdiction for their cases. Countries such as the United Kingdom and France have implemented strict duty of care legislation that can apply to international travel, and lawsuits can be initiated there if companies have a presence in those places, even if the incidents happened elsewhere.

In the case of litigation, penalties can be significant. In 2015, the U.S. Court of Appeals decided that a Connecticut boarding school failed its obligations when it took students to China in 2007 and a 15-year-old contracted bone encephalitis after being bitten by ticks. The court ruled that the school should pay damages of $41.5 million, $10 million of which was paid to the student’s family.

Identify Foreseeable Risks

To avoid such situations, companies have been urged to invest in programs that address the identification of risks, the adoption of prevention measures and the training of employees before sending them abroad. The key is to make sure that foreseeable risks are identified and properly dealt with.

Robert Quigley, duty of care expert, International SOS

“Every company is involved in different kinds of work and in different locations, so their foreseeable risks will depend on their own environment and the destination of their mobile workforce,” said Robert Quigley, a duty of care expert at International SOS. “But many companies do not act on their duty of care to the extent that they should, hoping that nothing will ever happen.”

This approach sounds misguided, especially considering the problems that employees can face away from home. They range from natural catastrophes to political violence and terrorism to accidents during leisure time and illness. Stress and depression are also concerns.

Some of the biggest threats, though, aren’t what you might expect.

“Motor vehicles are in fact the number one cause of death among aid workers,” said Lynne Cripe, director of resilience services at KonTerra, a consultancy that advises NGOs who send staff to extremely risky locations.

Another concern involves employees being jailed for breaking laws they aren’t aware of. In January, for example, a South African expat and his Ukrainian fiancée were arrested in the United Arab Emirates for having sex out of wedlock.

Laurie Sherwood, a travel industry attorney at Walsworth, said that the employer and its partners involved in the organization of a trip are expected to disclose to travelers as much as possible about the risks they’re likely to face. Therefore, a thorough assessment must be performed for all stages of a trip in order to identify all foreseeable risks.

“There is no duty to warn of unforeseeable risks,” she pointed out. “On the other end of the spectrum, there is generally no legal duty to warn of obvious risks.”

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Once risks are identified and shared with employees, companies must work towards training potential travelers and implementing systems that can help them before, during and after the trip, said Kevin Pedone, a vice president at Clements Worldwide. Pedone said specialized insurers like Clements offer online information platforms, pre-trip training and other tools to help travelers prepare themselves for the risks ahead.

In the event of an incident, these insurers have access to teams with expertise in evacuation services, medical support or kidnapping negotiations. “Companies do not want their HR staff negotiating with kidnappers,” he said.

“Many companies do not act on their duty of care to the extent that they should, hoping that nothing will ever happen.” — Robert Quigley, duty of care expert, International SOS

Once impacted employees return to the U.S., insurance can cover psychological evaluation, medical treatment, rehabilitation and even time off to help with the healing process.

Policies can also cover litigation costs, and if the organization is found negligent, any financial compensation up to the limits of the policy.

Document for Transparency

Every facet of an employers’ program for protecting the health and well-being of their traveling employees must be well documented, said Brown. It is vital, for instance, that the accountability chain in the case of an incident during an international trip is clearly specified. Individuals to whom the incident must be escalated have to be identified by title or by name, he recommended.

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In a recent report, International SOS pointed out that decision makers with duty of care responsibilities in multinational companies include managing directors, general secretaries, corporate security and risk managers, travel managers, medical directors, insurance managers, legal managers, heads of HR, global HR practitioners responsible for international assignees and employees responsible for managing the work of international assignees.

It’s not hard to see how communication can get broken with so many people involved, and why clarifying the role played by each one is an important task.

“If the company had policies and procedures in place, and the person followed them, then the company will probably be ok from a liability lawsuit point of view,” Quigley said. Doing things right can go a long way toward avoiding the publicity and uncertainty of a court case.

“Most of these cases don’t reach the courts, as they are mostly settled outside,” Quigley concluded. &

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

A Recall Nightmare: Food Product Contamination Kills Three Unborn Children

A failure to purchase product contamination insurance results in a crushing blow, not just in dollars but in lives.
By: | October 15, 2018 • 9 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.

PART ONE: THE HEAT IS ON

Reilly Sheehan, the Bethlehem, Pa., plant manager for Shamrock Foods, looks up in annoyance when he hears a tap on his office window.

Reilly has nothing against him, but seeing the face of his assistant plant operator Peter Soto right then is just a case of bad timing.

Sheehan, whose company manufactures ice cream treats for convenience stores and ice cream trucks, just got through digesting an email from his CFO, pushing for more cost cutting, when Soto knocked.

Sheehan gestures impatiently, and Soto steps in with a degree of caution.

“What?” Sheehan says.

“I’m not sure how much of an issue this will be, but I just got some safety reports back and we got a positive swipe for Listeria in one of the Market Streetside refrigeration units.”

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Sheehan gestures again, and Soto shuts the office door.

“How much of a positive?” Sheehan says more quietly.

Soto shrugs.

“I mean it’s not a big hit and that’s the only place we saw it, so, hard to know what to make of it.”

Sheehan looks out to the production floor, more as a way to focus his thoughts than for any other reason.

Sheehan is jammed. It’s April, the time of year when Shamrock begins to ramp up production for the summer season. Shamrock, which operates three plants in the Middle Atlantic, is holding its own at around $240 million in annual sales.

But the pressure is building on Sheehan. In previous cost-cutting measures, Shamrock cut risk management and safety staff.

Now there is this email from the CFO and a possible safety issue. Not much time to think; too much going on.

Sheehan takes just another moment to deliberate: It’s not a heavy hit, and Shamrock hasn’t had a product recall in more than 15 years.

“Okay, thanks for letting me know,” Sheehan says to Soto.

“Do another swipe next week and tell me what you pick up. I bet you twenty bucks there’s nothing in the product. That swipe was nowhere near the production line.”

Soto departs, closing the office door gingerly.

Then Sheehan lingers over his keyboard. He waits. So much pressure; what to do?

“Very well then,” he says to himself, and gets to work crafting an email.

His subject line to the chief risk officer and the company vice president: “Possible safety issue: Positive test for Listeria in one of the refrigeration units.”

That night, Sheehan can’t sleep. Part of Shamrock’s cost-cutting meant that Sheehan has responsibility for environmental, health and safety in addition to his operations responsibilities.

Every possible thing that could bring harmful bacteria into the plant runs through his mind.

Trucks carrying raw eggs, milk and sugar into the plant. The hoses used to shoot the main ingredients into Shamrock’s metal storage vats. On and on it goes…

In his mind’s eye, Sheehan can picture the inside of a refrigeration unit. Ice cream is chilled, never really frozen. He can almost feel the dank chill. Salmonella and Listeria love that kind of environment.

Sheehan tosses and turns. Then another thought occurs to him. He recalls a conversation, just one question at a meeting really, when one of the departed risk management staff brought up the issue of contaminated product insurance.

Sheehan’s memory is hazy, stress shortened, but he can’t remember it being mentioned again. He pushes his memory again, but nothing.

“I don’t need this,” he says to himself through clenched teeth. He punches up his pillow in an effort to find a path to sleep.

PART TWO: STRICKEN FAMILIES

“Toot toot, tuuuuurrrrreeeeeeeeettt!”

The whistles of the three lifeguards at the Bradford Community Pool in Allentown, Pa., go off in unison, two staccato notes, then a dip in pitch, then ratcheting back up together.

For Cheryl Brick, 34, the mother of two and six-months pregnant with a third, that signal for the kids to clear the pool for the adult swim is just part of a typical summer day. Right on cue, her son Henry, 8, and his sister Siobhan, 5, come running back to where she’s set up the family pool camp.

Henry, wet and shivering and reaching for a towel, eyes that big bag.

“Mom, can I?”

And Cheryl knows exactly where he’s going.

“Yes. But this time, can you please bring your mother a mint-chip ice cream bar along with whatever you get for you and Siobhan?”

Henry grabs the money, drops his towel and tears off; Siobhan drops hers just as quickly, not wanting to be left behind.

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“Wait for me!” Siobhan yells as Henry sprints for the ice cream truck parked just outside of the pool entrance.

It’s the dead of night, 3 am, two weeks later when Cheryl, slumbering deeply beside her husband Danny, is pulled from her rest by the sound of Siobhan crying in their bedroom doorway.

“Mom, dad!” says Henry, who is standing, pale and stricken, in the hallway behind Siobhan.

“What?” says Danny, sitting up in bed, but Cheryl’s pregnancy sharpened sense of smell knows the answer.

Siobhan, wailing and shivering, has soiled her pajamas, the victim of a severe case of diarrhea.

“I just barfed is what,” says Henry, who has to turn and run right back to the bathroom.

Cheryl steps out of bed to help Siobhan, but the room spins as she does so.

“Oh God,” she says, feeling the impact of her own attack of nausea.

A quick, grim cleanup and the entire family is off to a walk-up urgent care center.

A bolt of fear runs through Cheryl as the nurse gives her the horrible news.

“Listeriosis,” says the nurse. Sickening for children and adults but potentially fatal for the weak, especially the unborn.

And very sadly, Cheryl loses her third child. Two other mothers in the Middle Atlantic suffer the same fate and dozens more are sickened.

Product recall notices from state regulators and the FDA go out immediately.

Ice cream bars and sandwiches disappear from store coolers and vending machines on corporate campuses. The tinkly sound of “Pop Goes the Weasel” emanating from mobile ice cream vendor trucks falls silent.

Notices of intent to sue hit every link in the supply chain, from dairy cooperatives in New York State to the corporate offices of grocery store chains in Atlanta, Philadelphia and Baltimore.

The three major contract manufacturers that make ice cream bars distributed in the eight states where residents were sickened are shut down, pending a further investigation.

FDA inspectors eventually tie the outbreak to Shamrock.

Evidence exists that a good faith effort was underway internally to determine if any of Shamrock’s products were contaminated. Shamrock had still not produced a positive hit on any of its products when the summer tragedy struck. They just weren’t looking in the right place.

PART THREE: AN INSURANCE TANGLE

Banking on rock-solid relationships with its carrier and brokers, Shamrock, through its attorneys, is able to salvage indemnification on its general liability policy that affords it $20 million to defray the business losses of its retail customers.

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But that one comment from a risk manager that went unheeded many months ago comes back to haunt the company.

All three of Shamrock’s plants were shuttered from August 2017 until March 2018, until the source of the contamination could be run down and the federal and state inspectors were assured the company put into place the necessary protocols to avoid a repeat of the disaster that killed 3 unborn children and sickened dozens more.

Shamrock carried no contaminated product coverage, which is known as product recall coverage outside of the food business. The production shutdown of all three of its plants cost Shamrock $120 million. As a result of the shutdown, Shamrock also lost customers.

The $20 million payout from Shamrock’s general liability policy is welcome and was well-earned by a good history with its carrier and brokers. Without the backstop of contaminated products insurance, though, Shamrock blew a hole in its bottom line that forces the company to change, perhaps forever, the way it does business.

Management has a gun to its head. Two of Shamrock’s plants, including Bethlehem, are permanently shuttered, as the company shrinks in an effort to stave off bankruptcy.

Reilly Sheehan is among those terminated. In the end, he was the wrong person in the wrong place at the wrong time.

Burdened by the guilt, rational or not, over the fatalities and the horrendous damage to Shamrock’s business. Reilly Sheehan is a broken man. Leaning on the compassion of a cousin, he takes a job as a maintenance worker at the Bethlehem sewage treatment plant.

“Maybe I can keep this place clean,” he mutters to himself one night, as he swabs a sewage overflow with a mop in the early morning hours of a dark, cold February.

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Swiss Re Corporate Solutions to produce this scenario. Below are their recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

Shamrock Food’s story is not an isolated incident. Contaminations happen, and when they do they can cause a domino effect of loss and disruption for vendors and suppliers. Without Product Recall Insurance, Shamrock sustained large monetary losses, lost customers and ultimately two of their facilities. While the company’s liability coverage helped with the business losses of their retail customers, the lack of Product Recall and Contamination Insurance left them exposed to a litany of risks.

Risk Managers in the Food & Beverage industry should consider Product Recall Insurance because it can protect your company from:

  • Accidental contamination
  • Malicious product tampering
  • Government recall
  • Product extortion
  • Adverse publicity
  • Intentionally impaired ingredients
  • Product refusal
  • First and third party recall costs

Ultimately, choosing the right partner is key. Finding an insurer who offers comprehensive coverage and claims support will be of the utmost importance should disaster strike. Not only is cover needed to provide balance sheet protection for lost revenues, extra expense, cleaning, disposal, storage and replacing the contaminated products, but coverage should go even further in providing the following additional services:

  • Pre-incident risk mitigation advocacy
  • Incident investigation
  • Brand rehabilitation
  • Third party advisory services

A strong contamination insurance program can fill gaps between other P&C lines, but more importantly it can provide needed risk management resources when companies need them most: during a crisis.



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