Public Sector Safety

Protecting the Peacekeepers

Public safety employees face higher risk, but tend to flout safety rules.
By: | November 1, 2013 • 7 min read

A decade ago, the City of Knoxville paid an annual workers’ compensation bill of over $5 million. In recent years, the bill has averaged less than $2 million, thanks to professional risk management and top-down buy-in to the safety culture from the entire municipal government.

Knoxville is one of the many municipalities, counties and states to cultivate safe work environments for the nation’s 18.5 million full-time public employees. “The cheapest and most effective risk management is avoiding the risk in the first place,” said Chuck Wright, president of Travelers Public Sector Services. Risk management is itself the product of a deliberate and coordinated effort by a lot of smart people, including engineers, risk managers, ergonomists, purchasing managers and health care providers, Wright said.

Still, the public sector is an area where risk managers rightly fear the workers’ compensation exposures. And just as all politics is local, so is the most acute public sector injury risk.

Full-time local government workers reported the nation’s highest rate of work-related illnesses and injuries (6.1 percent) in 2011, according to the Bureau of Labor Statistics. State workers clocked in at 4.6 percent and private sector workers at 3.5 percent in 2010.


The Affordable Care Act, which stresses the kind of health and wellness programs public entities are adopting, will probably not affect workers’ compensation programs significantly, according to Steve Wurzelbacher, research industrial hygienist in the National Institute for Occupational Safety and Health, Division of Surveillance, Hazard Evaluations and Field Studies.

“Most sensible people don’t rush into burning buildings or run toward a bad guy with a gun.”
— Jim Bueermann, president, Police Foundation

Police and firefighters, who do inherently dangerous jobs, incur the most frequent and severe workers’ compensation claims of all public sector workers. “Most sensible people don’t rush into burning buildings or run toward a bad guy with a gun,” said Jim Bueermann, president of the Police Foundation. Police are almost 100 percent guaranteed to get hurt on the job, he said, because of the physical nature of their jobs and because they work around people who want to hurt them.

However, many workers’ compensation claims, even among the superhero class of workers, are for “ordinary” injuries and conditions, such as car accidents, repetitive motion and joint injuries, as well as stress- and obesity-related conditions.

Gary Eastes, Knoxville’s risk and benefits manager and a 2012 Risk & Insurance® Teddy Award winner, attributes much of his city’s drop in workers’ compensation claims to safety’s recent visibility on the municipality’s collective radar screen. Over many years and in small increments, Knoxville adopted many of OSHA’s workplace safety recommendations. Now, it performs routine safety inspections, including weekly spot inspections at intersections for seat belt use.

Knoxville now boasts almost 100 percent compliance for seat belt use, even among police, who are notorious for dissing the law they are charged with enforcing, according to John Chino, area senior vice president and member of the Public Sector leadership team at Arthur J. Gallagher.

The bulky hardware on officers’ service belts — baton, sidearm, radio, cuffs, Taser — can make buckling up awkward, uncomfortable, and slow at a time when speed counts, said Rich Roberts, director of special operations and public information at the International Union of Police Associations, AFL-CIO.

Cops Don’t Wear Seat Belts

The National Highway Traffic Safety Administration reports that more officers died in traffic incidents in 2010 than from any other cause, and 42 percent weren’t wearing seat belts. Many of the other 58 percent may have been left gravely injured and possibly, disabled. This is a tragedy for the officer and a huge financial burden for the insurer, Roberts said, especially for young, otherwise healthy officers who can expect many years of disability.

“Officers should always wear seat belts,” Roberts said.

“Seat belts are our most visible safety rule,” Eastes said, and officers who flout this rule are likely to flout others.

“Police started to take safety rules seriously when Knoxville’s civilian management put its foot down about seat belts,” he said.

Knoxville’s new wellness culture also helped tame workers’ compensation claims. The city employs three full-time certified ergonomists and a physical therapy team, which works with firefighters on safe ways to perform emergency medical services, such as carrying people down stairs and moving them out of crushed cars. Its on-site physical therapist works with the city’s medical team, which aids complex treatments, such as that for a diabetic with a knee injury.

Technology also offers some solutions, Eastes said, such as single-driver automated sanitation trucks that replace “the two guys hanging off the back of the truck,” who are subject to shoulder and back injuries from repeatedly lifting heavy loads. The technology will pay for itself in reduced workers’ compensation costs, he said.


As a matter of due diligence, said Travelers’ Wright, public entities should always perform routine checks on employees, such as confirming that those who drive for their jobs hold current licenses and have maintained clean driving records.

Unions and Politics

Contrary to the expectation that unions and municipalities are naturally at odds, Wright said, they actually share a common interest in employees’ well-being. This applies even in potentially explosive return to work cases for injured workers. Lost time from work costs municipalities dearly, both in overtime costs for other workers to pick up the slack and in medical benefits.

“For the city’s sake and the worker’s sake, everyone’s goal is getting workers back to work at the right time.”
— Chuck Wright, president, Travelers Public Sector Services

“For the city’s sake and the worker’s sake, everyone’s goal is getting workers back to work at the right time,” Wright said. Coordinated medical treatment and careful case management, combined with proactive risk control services, can determine the “right time” in each individual case.

“What helps this formula be successful is selecting the right partners to coordinate medical care,” said Joe Boures, president of managed care company Healthcare Solutions. “Research has proven that over time, not properly managing care leads to significantly increased medical costs and delayed return to work.”

In states with particularly generous workers’ compensation laws, such as, Illinois, Florida, New York and especially California, workers may have a financial disincentive to return to work promptly, said Dan Guth, an area vice president at Arthur J. Gallagher.

Police and firefighters who belong to the Public Employees Retirement System can collect 100 percent of their salary, tax free, for up to a year for each industrial injury; other public sector workers generally can collect two-thirds of their average weekly salaries. Some public entities try to return compromised employees to light duty or part-time work to save costs and hasten recovery, but many simply keep them out of work until they get medical clearance to return to their jobs.

Even though the cop or firefighter wins financially for a year by protracting their disability leave, said the Police Foundation’s Bueermann, most prefer to return to work as soon as they’re able, since a long furlough often heralds the end of their careers, especially for older workers.

California’s generous workers’ compensation laws also produce a slew of “additional body parts” claims, especially, as the statistics suggest, for teachers.

“An attorney may expand the original back or knee injury claim to include a sleep disorder, internal injury, stress or psych claim or sexual dysfunction,” Guth said. Municipalities and their insurers should scrutinize the claim for legitimacy.

Although it happens rarely, unions can be an obstacle to workplace safety in the area of safety incentives, said Chino.

“Some public agencies consider a reward system of money or extra time off for individual employees who use personal safety equipment, but the unions object on the grounds of special treatment for a few employees.”

When Self-Insurance Works

The Mesquite, Texas, School District meets the criteria for self insurance. It employs 5,400, so it has a sufficiently large pool of insureds. It has a strikingly low incidence rate — 1.11 of every 100, far below the 6.1 percent of its national cohort. Almost all of its 182 to 200 claims per year are from slips, trips and falls, plus violence from the occasional agitated student, said James Huckaby, the district’s administrative officer of operations and risk management. Those are the kind of injuries that inevitably slip through the district’s fine net of safety education; careful housekeeping; low-cost, easy-access medical facilities; wellness programs; and safety best practices. Its workers’ compensation costs have been stable for several years, averaging about $700,000 per year.


Like Knoxville, which is also self-insured, Mesquite’s top-level elected officials support the safety programs that minimize on-the-job injuries. Both entities have the support infrastructure to administer their self-insured programs and cash reserves to pay claims.

These attributes — strong infrastructure, a sufficiently large insured universe, top-level support, safety buy-in from the workforce, predictably low claims and fiscal discipline — point to a municipality in a good position to self-insure, said Victoria Nolan, risk and benefits manager for Clean Water Services in Oregon.

“Public entities may want to self-insure because it’s cheaper than commercial insurance, or they can manage their programs better or both,” Nolan said, but they should scope their readiness to take on the considerable financial and administrative responsibilities first.

“An entity that hires a third-party administrator can give up any cost savings on the claims side to administrative fees,” she said. “A feasibility study will show if it’s a good choice.”

** This story is Part II of a three-part series.Read Part I, Stretching Risk Management, and Part III, Cutting Down Agriculture Risk. **

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of He can be reached at