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Liability Risk

Allowing Guns in the Workplace Introduces Liability Risk

Having an armed manager adds on-the-spot protection, but guns in the workplace could open companies to liability risks.
By: | May 1, 2018 • 5 min read

The U.S. saw 54 mass shooting incidents in the first three months of 2018. The Gun Violence Archive, a nonprofit that collects and maps gun-related violence in the U.S., reported 3,619 deaths and 6,315 injuries in that same timeframe.

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“Workplace violence incidences are on the rise in the United States,” said Emily Loupee, Los Angeles-area vice president, management liability practice group, Gallagher. “According to OSHA, two million workers in America are victims of workplace violence each year. A November 2017 CNN analysis reported that despite having only 5 percent of the world’s population, the U.S. accounted for 31 percent of the public mass shootings between 1966 and 2012.”

“It’s the number one killer of women in the workplace and third overall,” said Mark A. Lies, labor attorney, Seyfarth Shaw LLP.

From movie theatres to churches, elementary schools to the workplace, gun violence knows no bounds. Many have spoken out about gun regulation and reform, mental health screenings, raising the legal gun-purchasing age, arming teachers and so on.

The hard truth, however, is that change takes time. While the country waits for political action, violent incidents can still occur. Companies willing to take matters into their own hands are looking for ways to prevent, prepare for and mitigate the risk of an active shooter.

Firearms in the Workplace

One solution: arming managers.

“This is a newer consideration for companies that is arising from the large number of incidents occurring both in the public domain and in the workplace,” said Kim Auchstetter, the Chicago-area executive VP of retail property/casualty brokerage operations, Gallagher.

And while the idea itself comes with controversy, it isn’t without its merits. A Gallagher-published article, entitled “Arming Managers With Guns?” and written by Lies, considers advantages and disadvantages of the proposal.

The biggest argument for companies allowing managers to carry a gun is that, in the event of an active shooter, the manager would have a firearm available to protect themselves and the workers.

“It will be interesting to see how the standard markets react to guns in the workplace. Some may decline to provide a quotation and others may seek reinsurance to mitigate their risk, which could increase the cost of insurance for businesses.” — Kim Auchstetter, executive VP, retail property/casualty brokerage operations, Gallagher

“You have someone on the spot. Sometimes it can take the police time to get to a place. That’s critical time,” said Lies. “Somebody who is trained can stop an incident right there.”

Lies, however, called this a “limited advantage,” because any armed manager needs proper permits to own a gun. And a firearm owner identification card and a concealed carry permit do not grant managers the authority to bring firearms into the workplace; the employer would need to set up the proper channels for a gun to be present at work.

First step, Lies said, is to review federal and state law. Lies also suggested that if an employer chooses to allow firearms at work, they should consider requiring copies of their managers’ permits on file.

However, having proper documentation and the law on the employers’ side isn’t always enough.

Edward Zabinski, area senior vice president, Gallagher

“The manager is not a sworn law enforcement officer, so the legal immunities that such officers have for liability to themselves and the employer will not attach,” Lies wrote in the article.

If a manager were to use a firearm on the workplace premises to stop a threat, they would be relying primarily on their inherent right to self-defense. Additionally, the manager could be seen as acting as an agent of the employer, which opens the company to potential agency liability claims if an incident occurred.

“From an insurance and risk management perspective, one of the biggest issues with arming [managers] is the increased potential liability you can face as an organization,” said Auchstetter. “This exposure can also limit — or potentially completely eliminate — the number of admitted insurance carriers that will agree to underwrite a company if they begin arming their managers with firearms.”

“If I were an insurer, I would want to know about the manager [before agreeing to insure the company],” said Lies. He suggested employers should ask managers interested in carrying a gun to take a psych evaluation.

“In my experience,” he said, “many employers aren’t involved in that yet.”

It’s difficult to assess how an individual might react in a high-stress moment like facing an active shooter. A psych evaluation can give just a hint of what a manager is capable of doing.

The permits show “they can handle a weapon,” Lies said, “but when it comes down to a stressful situation, are they psychologically ready? Will they make the right decision? Are they trained in reading another person’s behavior? Will they tell the shooter to surrender and wait or will they shoot?”

Split-second judgment calls can distress even seasoned police officers trained in such situations. If a manager were to exceed the scope of reasonable force or act negligently or recklessly, the company could be liable for civil damages for personal injury, wrongful death, emotional damages, punitive damages and more.

“It will be interesting to see how the standard markets react to guns in the workplace. Some may decline to provide a quotation and others may seek reinsurance to mitigate their risk, which could increase the cost of insurance for businesses,” Auchstetter added.

Planning Ahead

Active shooter/malicious acts, workplace violence and terrorism coverages are just some of the products geared toward helping insureds in the event of a workplace shooting.

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“Many insurers offer endorsements for assault or workplace violence on kidnap and ransom insurance policies for 15 to 40 percent additional premium,” said Loupee. “The policies cover fees such as lost business income, security, rest and rehabilitation, public relations, crisis response, lost wages, counseling and death benefits.”

“These coverages also help to address the gray areas that can be present with traditional insurance following these incidents,” Auchstetter said.

Edward Zabinski, Chicago-area senior VP-loss control and safety services, Gallagher, said companies can start the conversation by creating policies preventing workplace violence and harassment, establishing a zero-tolerance code of conduct, addressing conflicts quickly to prevent escalation, conducting workplace violence and harassment prevention training, and creating safe channels of communication so that unwanted behavior can be addressed promptly. &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

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]