Risk Scenario

Deadly Exposures

A toddler death stemming from a MRSA outbreak wreaks havoc at a hospital.
By: | August 22, 2012 • 10 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

Shane Graves, the chief pediatric heart surgeon at St. Michael’s Hospital, closed the door of the hospital room he had just left and stopped to gather himself.


In the room behind him lay the dead body of Garret Easton, a two-year-old boy who had valiantly survived a heart defect and corrective surgery only to have his life swept away by a virulent strain of Methicillin-Resistant Staphylococcus Aureus or MRSA, that somehow, the boy had contracted in this very hospital. “Damn it, Damn it, Damn it!” Dr. Graves said to himself inwardly.

Now Dr. Graves had to make the walk that many physicians must  make and never get inured to making. He was the one that had to tell Garret’s young parents that their first and only child was gone.

His mind, normally insightful, analytical and serenely well-informed, had become a cauldron of emotion-fueled thinking. Rage, grief, embarrassment and fear swirled through him.

He wouldn’t blame Richard Easton, the dead boy’s father, if he put his hands around his neck and tried to choke him to death.

Dr. Graves made a left turn, walking as if he were in a nightmare, and went through the swinging doors to the waiting room. When the Easton’s saw his face, they knew, and Jennifer Easton buried her face in her husband’s chest and began sobbing uncontrollably as her husband put his arms around her to comfort her.

The infection that killed Garret Easton had entered the hospital like a thief in the night and evaded what had been fairly sound safety protocols. The staff at St. Michael’s had been educated that MRSA infections are transferred primarily from skin-to-skin contact and that hand washing was mandatory after handling patients or coming into physical contact with them in any way.


Scenario Partner

The infection was discovered in an elderly patient who had been admitted to intensive care from a nursing home and was receiving respiratory therapy treatments for pneumonia. She had been in ICU for three days when an alert nurse noticed reddening in the patient’s nostrils and what looked like the beginnings of a lesion. Following hospital protocols, the patient’s nose was immediately tested and she was found to have the infection.

Once detected, the hospital’s infection control committee, which consisted of the Infection Prevention Professional, a physician and representatives from administration, nursing, operations (housekeeping and dietary) and pharmacy, was notified of the outbreak. Then every patient in the ICU was tested, in accordance with hospital procedure.

As a result of that testing, two more patients were found to be infected. All three infected patients were placed in specially designated rooms where administration of an intravenous antibiotic was initiated and where additional infection control protocols were put in place. Those measures included contact precautions (use of gowns and gloves by staff and visitors) use of dedicated non-critical care equipment, assignment of dedicated staff to care for the patients with the MRSA infection, control and monitoring of traffic in and out of the patient rooms and focused staff and family education.  Assigning the patients to specially designated rooms also allowed for effective environmental and equipment cleaning and decontamination.

It was after the three patients were placed in designated care areas and treatment for the MRSA initiated that the incision in Garret Easton’s chest had shown signs of infection and, that the connection between all the affected patients was determined to be a respiratory therapist who had failed to use proper hand washing techniques after direct patient contact.

Again, following protocols, the infection control committee directed that every patient in the pediatric wing be tested for MRSA. One more patient, a young female on the pediatric wing also tested positive for MRSA infection, but she wasn’t as compromised as Garrett, and was stabilized with the recommended course of an intravenous antibiotic.

Additional precautionary steps taken by the hospital included active infection control surveillance and re-education of staff on infection prevention policies and procedures including the importance of hand washing. The ICU and pediatric wing were vacated and an environmental cleanup was conducted. Unfortunately, it was too late for Garrett Easton, but the infection appeared to be at least under control.

Part Two

There was nothing about the hospital’s reaction to the MRSA outbreak that was random, kneejerk or left to chance.


Vickie Flaherty, a former St. Michael’s head nurse and the hospital’s current risk manager, had worked hand-in-hand with the medical directors and operations officers to make sure that the hospital’s crisis response team performed well under these kinds of circumstances.

Vickie had worked her way up the career ladder from an entry level position as a nurse’s aide 23 years previously. She had at her disposal one of the leading healthcare insurance brokerage practice teams in the country.

In the last 24 months, Vickie and her team had successfully reduced collateral requirements for workers’ compensation exposures, helped the hospital acquire a local ob/gyn practice with no increase in medical malpractice premium rates and established an onshore captive for the hospitals in-house physicians. It had been a lot of work.

She and her team had bitten off so much work lately that Vickie was starting to get a nagging feeling that in their ambitious approach she and her brokerage team may have overlooked some more fundamental developments.

Vickie’s effectiveness was based in solid education. A financial quarter didn’t go by that she didn’t attend a webinar or attend an in-person training session that gave her opportunities to increase her knowledge.

As she sat in her office on a mid-winter Wednesday, Vickie let her eye roam for the fourth time that day to a framed photo of her son and two daughters playing whiffle ball on the Jersey Shore. Vickie just stared at the photo for a while. Trim and athletic, she had learned a love of the outdoors from a young age and had the good sense to pass that love on to her children.

Vickie was a trained veteran of, the value of transparency and disclosure where hospital staff members meet with the families of injured or deceased patients in an effort to offer condolences, offer an apology, provide an explanation of facts known at that time and answer questions. Additionally, this time would be used to provide the family support and community resources as well as, to establish communication channels designating a contact person and developing a timeline for follow-up communication with the family.

Vickie got butterflies before all of these meetings but had them doubly so today, since her meeting with the family was just five minutes away.

There was nothing to be done though. She had a job to do and she had to lift herself up out of her office chair and go do it.

The Eastons and their attorney were on one side of table when Vickie entered the conference room. Shane Graves, the pediatrics heart surgeon and the hospital’s general counsel were closest to her. There was one chair open and Vickie took it. Vickie was a mother and when she caught Jennifer Easton’s eyes the look she saw there went through her like a knife.

The meeting was just two minutes old when Dr. Graves exploded.

“There is absolutely no reason your boy had to die,” Dr. Graves said, looking squarely at the Easton’s.

“He was making a good recovery, and he was killed by a hospital-acquired infection that this hospital could and should have prevented!” Dr. Graves said, pounding the table with both of his flattened palms.

The St. Michael’s attorney hurriedly tried to get Dr. Graves to settle down, but he was too late. The Easton’s attorney didn’t say anything. For once, he didn’t have to.

Part Three

Vickie left the meeting bordering on a state of shock.  Her head was spinning. In her gut she felt that Dr. Grave’s ill-timed outburst meant that her E&O limits were now in jeopardy.


When she got back to her office, she was barely settled in her chair when her phone rang. It was the head of her healthcare brokerage team.

“Vickie I got some bad news for you,” the broker said.

“What?” Vickie said, her normally genteel veneer already worn a little thin.

“Your business interruption claim and your environmental cleanup costs on that MRSA outbreak aren’t covered.”

“What do you mean?”

“MRSA’s considered an environmental pollutant under the general liability and property policy language, as first party business interruption wouldn’t normally be covered under a general liability policy.  I don’t think there is any way we can get out of this,” the broker said.

“I had no idea,” Vickie said.

“Neither did I, sorry but I didn’t,” the broker said.

There was a pause as the veteran risk management partners digested this harsh reality.

“Vickie, it’s not like you’ve had a lot of losses, we’ve been doing a good job,” the broker said.

Vickie didn’t say anything and there was a long pause.

“Here’s what you’re looking at in terms of an uncovered loss,” the broker said.

The broker had a job to do, but as he went on, the loss numbers he was reciting fell on Vickie as if she had a tin ear.

After Vickie hung up, she felt emotion choking her air passage and decided to run to the bathroom to splash some water on her face.

“Am I a fraud or am I just stupid?” she asked herself internally as she stared at herself in the mirror of the second-floor women’s restroom in the hospital’s administration building after washing her face.

The details of the botched coverage kept running through her mind like a song she couldn’t get out of her head.

“How in God’s name could I have known that?” Vickie said, out loud this time.

“Huh?” someone said from behind a bathroom stall door.

“Nothing,” Vickie said. “Sorry.”

Vickie had always played fair and by the rules.

So how was she now staring at a $2.3 million uncovered loss?


Vickie Flaherty, a well-educated, industrious healthcare risk manager, sees her institution get hit with a $2.3 million uninsured loss because of gaps in her insurance coverage after a hospital-acquired infection outbreak exposes environmental pollution exclusions in her general liability and property policies.

Video Insights: Matthew Kahn sat down with Marcel Ricciardelli, Senior Vice President, Environmental at Allied World who is the sponsor of this scenario, for an in-depth discussion of “Deadly Exposures”. Highlights of their conversation are integrated into the summary below.

1. Build staff-wide awareness of hospital-acquired infections: Healthcare-associated deaths are now one of the top 10 leading causes of death in the U.S., accounting for nearly two million infections and 100,000 deaths annually. An outbreak of Legionella at a hospital in Atlanta resulted in cleanup costs alone of approximately $1 million.

2. Be ready: Have a crisis response plan in place to contain infection outbreaks. That plan should include details of how your organization handles sterilization of rooms, clothing, bathrooms, sinks, equipment and eating utensils. The plan should also include guidance on how to communicate not only with the families of victims but with other concerned patients and the media.

3. Be adaptable: Be aware that your response plan might look good on paper but not work so well in execution. Vickie had a detailed response plan, but the hospital still found itself dealing with angry patients and families. Don’t get stuck reading a script if the situation demands flexibility.

4. Manage your message: Emotions can run high when there is a death or a serious medical outcome from a hospital-acquired infection. Vickie’s meeting with the deceased patient’s family to promote transparency and disclosure was the right approach but Dr. Graves’ outburst put the hospital in danger of losing coverage and being damaged by potential litigation. Be sure to meet with all providers before holding a similar meeting to ensure that everyone is on the same page and will communicate a consistent message.

5. Focus on exposures, not policies: In an effort to keep costs down, agents frequently focus on policies rather than the exposures that exist. Too often, they try to write the existing coverage cheaper rather than writing the right coverage at a fair price. That could leave a company exposed.

6. Review your coverages: A MRSA outbreak could be categorized as an environmental pollutant and excluded from the standard E&O (Med Mal), Property and General Liability policies. These policies should be thoroughly vetted for such exclusions.

Allied World Video Disclaimer: The information in these videos is in response to a hypothetical risk scenario.  Coverage is underwritten by Allied World Assurance Company (U.S.) Inc. and Allied World National Assurance Company.  Coverage is only offered through licensed agents and brokers.  Actual coverage may vary and is subject to policy language as issued.
Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]