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 aheisler@lrp.com.

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 dreynolds@lrp.com.