Risk Scenario

Minnick Engineering 911

A fired employee exacts revenge on his employer, battering not only bodies but also coverage limits.
By: | February 25, 2014 • 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.

The Crackup

To a disinterested observer, the sight of a middle-aged civil engineer using the company parking lot on a spring afternoon as a dressing room would be, at best, an example of bad taste.

Scenario_Minnick911

But former Minnick Engineering employee Bill Hayes wasn’t getting ready for a game that afternoon. No, he had mayhem on his mind.

Hayes, terminated just two hours previously, got his jersey on and grabbed a metal softball bat from the back of his SUV.

Hayes paused, arched his back and let out a wounded scream. Then he charged the front door of the civil engineering company.

Matthew Forrester, just two years out of college, was the first Minnick employee to see Hayes coming.

“Stop Bill, don’t do it!” Forrester yelled and picked up a plastic chair in an attempt to slow Hayes down.

With one swipe of the bat, Hayes knocked the chair out of Forrester’s grasp and shattered Forrester’s left forearm.

Forrester’s scream of pain alerted a handful of employees, including Linda Minnick, the daughter of the company founder and current CEO, who was in the process of interviewing a job candidate in a nearby conference room.

Linda jumped up, the shocked job candidate right behind her, and tried to get to the conference door before Hayes did. But Hayes, a former college middle linebacker, was too strong and too quick.

Partner

Partner

He stuck the bat in the narrowing door crack, then used it to violently thrust the door back open. Hayes got in three swings before the job candidate chased him out of the room.

The attack left Linda Minnick with some cracked ribs and the job prospect with a shattered jaw.

“Who you gonna’ fire next, Linda?” Hayes yelled as he ran deeper into the building. Some employees ran for cover and others set off after Hayes.

Linda Minnick had terminated Bill Hayes a scant 127 minutes previously, but it had been a long time coming.

The interview with the young job prospect filled her with optimism — at least until Bill Hayes roared back into the building and carried out his act of revenge.

In pain but trying to focus, Linda Minnick looked out the window to see a Channel 4 television crew rolling into the company parking lot.

“How did they get here so fast?” she said to no one in particular, as an administrative assistant knelt down next to the stricken job applicant, who was sitting in a nearby chair in severe pain.
Right behind the news truck was a police cruiser.

“What?” Minnick said again, to no one. In the space of the last two minutes, she felt that she was becoming mentally unhinged.

The History

The shock of the attack wasn’t the only cause of Linda Minnick’s confusion.

Scenario_Minnick911

When the Springfield Township Police escorted Bill Hayes out of Minnick Engineering, this time for the last time, he was in handcuffs. Channel 4 was there to record the whole thing.

The television crew was there, courtesy of Hayes himself. Before his onslaught, Hayes had called his cousin Tommy, a Channel 4 cameraman, and told him he should come to the Minnick offices that afternoon, that he was going to “see some things.”

Linda was weak and in shock. The pain of her cracked ribs felt like someone was jabbing a knife into her lung. She could only sit and watch the police sergeant shove Bill Hayes’ head down into the cruiser.

But just before Hayes was shoved into the car, he caught Linda’s eye and smiled a demented smile.

A shiver went through Linda as she watched the patrol car roll away.

“This is all my fault,” she said to herself.

Linda’s memory provided it for her all too clearly. Five years ago, Bill Hayes punched an office wall during a meeting that was called to deconstruct some engineering errors in a public sector project.

Scenario_Minnick911

Then, three years later, Mrs. Yost, a kindly woman who worked in sales administration, was working late one night and saw Bill Hayes urinating in a potted plant by the copy machine.

It was a case of “He said, she said.”

Hayes denied doing it. Mrs. Yost, who was 67 and close to retirement, became emotional when questioned about the incident and seemed to want to put it out of her mind. Again, no action was taken against Hayes.

Minnick was always a family-run operation- handling employee situations like the one Hayes presented was way beyond the realm of what Linda was prepared for.

The day of Hayes’ termination she had finally had enough of his inconsistent performance and took that step without thinking further on the potential reaction that it may have elicited.

Minnick was ill prepared for this tragedy. She knew that now as surely as she felt the stabbing pain in her side where her ribs were cracked.

A paramedic ran up to Linda Minnick.

“See to him first,” Minnick said, nodding to the seriously injured engineering graduate sitting in a nearby chair.

The initial toll from Hayes attack was staggering enough. There was the first wave of injuries to Linda Minnick, Matthew Forrester and the job applicant, Henry Neal, whose jaw injury required extensive and expensive reconstructive surgery.

But Hayes had also injured three more people, two of them seriously, before the police got to him. One injured party was the employee of a contractor, Warren B. White Custodial Services. Hayes had shattered that unfortunate man’s knee with his prized metal softball bat.

The six and ten o’clock local news featured footage of Bill Hayes being led out of the Minnick Engineering offices in handcuffs. Watching the coverage with her husband, Linda Minnick could only hope the story didn’t go national.

The Cover

From a coverage standpoint, Minnick Engineering was as vulnerable as its employees, prospective employees and contractors were the day Bill Hayes did what he did.

Scenario_Minnick911

Warren B. White Custodial Services and the family of Henry Neal sued Minnick Engineering, alleging that the company had inadequate physical defenses in place in the event of an act of workplace violence.

Their lawsuits were successful, arguing as they did that the young Harry Neal suffered substantial emotional, not to mention physical trauma, getting hit in the face with a baseball bat at his very first job interview.

The janitor, who supported a wife and four children, also provided a sympathetic portrait for a jury. Linda was deposed as part of the legal proceedings. Under questioning, she admitted what the plaintiffs’ attorneys uncovered in their research.

Hayes presented a potential threat that hadn’t been adequately addressed by company leadership.

There was workers’ compensation coverage for the injuries to Forrester and the two other employees. But everything else hit the company’s general liability policy.

The litigation expenses alone in the Henry Neal case and the separate Warren B. White action amounted to more than $400,000.

Then came the medical and the emotional pain and suffering, which amounted to $1.2 million.

Those amounts tore right through the company’s self-insured retention of $200,000 and kept on going through its $1 million primary layer and into the $5M umbrella layer. Linda’s background was in engineering, not finance. Risk management was something she was sensitive to but now she was getting a real education in it.

There had been nowhere for the company’s general liability policy to run and hide in the aftermath of the Bill Hayes case. The broker trying to place the company’s coverage the following year was really up against it.

The company’s lack of a formal crisis management plan including methodology to deal with workplace violence was front and center with the underwriters.

“But we need coverage,” said Vince Liriano, the COO who handled insurance for the company. Minnick Engineering didn’t have a risk manager as such.

“Well, we’re going to need some premium increases, and larger retentions,” the underwriter said.

Leaving the renewal meeting, Linda felt sick to her stomach.

The only carrier that would talk to them wanted to triple the self-insured retention on the account and wanted a 40 percent premium increase.

There were two images Linda could not get out of her mind. The enraged, demented face of Bill Hayes forcing open that conference door, and the amount of money she and Vince Liriano had just agreed to as a self-insured retention.

The day Linda took over the reins of her father’s company seven years ago was the proudest day of her life. Now, a job doing traffic engineering studies in any other town but this one looked like a dream job.

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance partnered with XL Group to produce this scenario. Below are XL Group’s recommendations on how to prevent the losses presented in the scenario. These lessons learned are not the editorial opinion of Risk & Insurance.

1. Security assessments: Pre-incident security assessment and consulting, available through qualified Security Consultants, subsidized by an allowance provided by the Insurer, with Kidnap Ransom & Extortion coverage, could have gone a long way in preventing the injuries and emotional trauma that buffets Minnick Engineering in this scenario. Such a Consultant assessment would have resulted in creation of a formal Crisis Management Plan that would have included premises security recommendations, such as double door implementation and locking mechanisms that may have prevented this attack. That consulting could also include training for employees in how to prevent, diffuse and respond to a workplace violence event.

2. Kidnap, ransom and extortion coverage: The actions that took place in this scenario would have triggered coverage under the definition of Assault in the XL Kidnap Ransom & Extortion policy. This coverage, in addition to providing the Security Consultant pre-incident training, would have mitigated the expenses that accrued to Minnick Engineering’s general liability and umbrella policies. Assault limits are generally available up to $2.5M Personal Accident, Legal Liability, Expenses and Consultant Expenses are all included in cover.

3. Consider medical and legal costs: In this scenario, medical and legal costs ended up constituting the lion’s share of losses. In addition to the physical injuries to the outside contractor and the young job prospect, there is also psychological damage and counseling costs to consider. A KRE policy would not only reimburse an insured for physical and mental medical costs, it would also cover the legal liability in cases where the insured is sued by the victims and those costs assigned to the insured.

4. Spread risk management responsibilities: One of the weak points in Minnick Engineering’s risk management structure was that the burden of determining what should be done with a potentially dangerous employee was siloed. Pre-incident counseling, which the Security Consultants provided by coverage under KRE insurance, could have offered valuable training to key executives who might not have had a protocol in place to handle a potential workplace violence situation. Additionally, a holistic Crisis Management plan could have been crafted, providing clear and concise direction to the senior team on prevention and management of a wide variety of situations that could harm a company’s personnel, property and reputation.

5. Consider your portfolio: Just as a key executive should not work in isolation when it comes to making risk management decisions, neither should a single insurance policy be left to take the brunt of all possible risks. Getting renewals for Minnick Engineering’s general liability policy became a nightmare after the company was hit by a workplace violence event. A KRE policy could have handled many of the expenses in this case and spared the more expensive general liability policy.

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.

Advertisement




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.

Advertisement




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?

Advertisement




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.

Advertisement




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.

Advertisement




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]