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Sponsored: Philadelphia Insurance Companies

Serving the Servants: Mitigating Liability for the Human Service Sector

The opioid crisis is the most significant trend impacting social service organizations’ ability to manage risk.
By: | May 1, 2018 • 6 min read

The opioid epidemic is well-recognized as one of the nation’s most pressing issues.

Widespread addiction affects not just the lives of individuals and their families but also the businesses who employ and serve them.

Human service organizations feel the effects most acutely, as they may have staff members battling with the very addictions and consequences they are supposed to help their clients escape and overcome. At the same time, the opioid crisis is driving up demand for their services and stretching their resources thin.

Counseling and addiction treatment centers, homeless shelters and foster care systems are burdened by an influx of people seeking help — an increase directly correlated with the prevalence of opioid addiction. But facing a lack of funding and chronic staffing shortages, these entities struggle to meet the need and open themselves to greater liability exposure.

“From an insurance perspective, the opioid crisis is the most significant trend impacting social service organizations’ ability to manage risk,” said Paul Siragusa, vice president, Philadelphia Insurance Companies.

“The threat of liability lawsuits looms large over this industry.”

Addiction, Social Services and the Liability Problem

Paul Siragusa, vice president, Philadelphia Insurance Companies

No company is immune from the insidious influence of addiction on productivity and performance. Employees struggling themselves or with family members take off more time from work. When they are physically present, their minds may still be distracted.

But, “organizations charged with caring for the intellectually or physically disabled, the homeless or their children cannot afford to have mentally disengaged employees,” Siragusa said. “When staff doesn’t show up, people get hurt.”

For detox and counseling centers, a flood of new clientele makes it harder for staff to adhere to supervision guidelines. Many facilities have specific protocols dictating one-on-one or two-on-one supervision at certain times. If there isn’t enough staff to maintain those levels or if workers on duty are distracted, it can create a life-threatening problem. The perils range from choking hazards to dangerous withdrawal symptoms or even violence perpetrated by angry clients against themselves or others.

“Failure to meet supervision guidelines is one of the greatest sources of lawsuits and liability claims for these organizations,” Siragusa said. “If someone is not present — physically or mentally — the people they’re meant to watch over can die.”

More adults entering addiction treatment also coincides with more children entering the foster care system.

“Some state foster care systems have seen a 20 to 30 percent increase in children being placed into foster care, and they are citing a direct correlation with the opioid epidemic. When parents are hooked on drugs, kids have to be removed from the home,” Siragusa said. “We haven’t seen a spike like this since the crack cocaine epidemic of the 1980s.”

With more children and more foster families involved, social workers have a harder time properly vetting each situation before placing children into homes.

“Sexual or physical abuse claims involving a foster child garner multimillion dollar verdicts on a weekly basis,” Siragusa said. “They usually boil down to the failure of social service providers to fully inspect and evaluate foster homes, to fully vet foster parents or to monitor children once placed in the home. None of these functions can be properly executed if human services organizations are understaffed based on the increased caseload.”

Homeless shelters experience similar issues, as homelessness and substance abuse rates are also highly correlated. According to a study published by the American Psychiatric Association, 25 percent of homeless people surveyed said drugs and alcohol were a major cause of their homelessness.

“From an insurance perspective, the opioid crisis is the most significant trend impacting social service organizations’ ability to manage risk.”
— Paul Siragusa, vice president, Philadelphia Insurance Companies

“The biggest liability risk for homeless shelters when they’re overwhelmed with entrants is client-on-client abuse. A significant percentage of the client population have severe mental health issues, and fights often break out over beds or belongings. When fights result in injuries, the injured party could secure pro bono legal assistance to bring suit,” Siragusa said.

“Lawsuits alleging the shelter did not provide a safe environment can result in verdicts or settlements in the hundreds of thousands.”

Insufficient funds and low staffing levels exacerbate these risks. Most social service organizations already operate on narrow budgets, making it difficult to hire extra staff or provide additional resources when demand is high. Counseling centers, homeless shelters and nonprofits in this space cannot offer the salaries that typically help attract and retain high-caliber workers. High turnover rates increase the risk that employees are under-trained and may not fully understand their responsibilities or workplace policies.

Risk Mitigation Solutions

More federal funding could help these providers better serve their communities. The President’s proposed budget released in February of this year included $13 billion to help fight the opioid crisis, allocating $3 billion in 2018 and $10 billion in 2019 to the U.S. Department of Health and Human Services.

In the meantime, social service entities can take some simple steps to minimize liability exposure using their existing resources.

“Drug screening and testing for employees is imperative. Workers responsible for the safety and care of people impacted by addiction cannot be afflicted with the same struggles themselves,” Siragusa said. Clear policies around supervision ratios and client monitoring, frequently communicated to staff, can also help drive home the importance of those standards.

Organizations can also utilize risk management specialists to identify ways to strengthen their defense should a claim end up in court. Proper documentation of everything from drug testing results, employee policies and training, incident reporting and response actions can help an entity argue its case in front of a jury.

With a long track record in this sector, Philadelphia Insurance has the experience and expertise to align clients with these critical resources. It has worked with social service providers since 1989, but the company’s history with underserved communities extends back to its inception in the 1960s.

“Our founder, James Maguire, attended college in Philadelphia and was first exposed to the deaf community in his senior year when he volunteered at Pennsylvania School for the Deaf to teach basketball to the students. Through the friendships established there, he later realized there weren’t many life insurance options available to them. The industry had overlooked them entirely,” Siragusa said.

“So he learned sign language, convinced his first employer (a life insurance company) to allow him to start selling personal lines coverage to the deaf, and was hugely successful.”

The ethos of helping communities that society tends to cast aside or ignore carried over to the founding of Philadelphia Insurance two decades later. Today, social service providers are the insurer’s primary clients, representing one-third of its business.

“We know the industry well and provide the best products available for the human service sector. Our underwriters and claims staff understand their needs and challenges,” Siragusa said.

The evidence lies in the longevity of its relationships. Other carriers in the space typically work with an insured for three to four years before their appetite changes. Philadelphia’s clients, on average, stick with them for 12.

To learn more about Philadelphia Insurance Companies’ solutions for human service providers, visit https://www.phly.com/nonprofit.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.




Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.

High Net Worth

To the High Net Worth Homeowner: Build a Disaster Resiliency Plan You Can Be Proud Of

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

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Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

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Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

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“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]