It Can Happen to You: Why Workplace Violence Insurance is the “New Normal”
Posted in: Commercial Insurance
The Capital Gazette, Sandy Hook, Las Vegas, the Colorado Cinemark—active shooting incidents are becoming more frequent every year. In 2017 alone there were 346 mass shootings in the United States, compared to 270 in 2014. And as of July 31 of this year, we’ve had 202 incidents.
An active shooter event is just one type of workplace violence for which your business is vulnerable. Every year, 2 million American workers report having been victims of workplace violence. The cost to organizations is staggering. A single incident can have serious consequences, including lost lives, psychological trauma to victims that can manifest or last months or years after an incident, physical damage to your building, and lost productivity.
If workplace violence does happen in your business, resuming your normal operations after a traumatic attack can be extremely difficult (if not impossible). You would likely face questions such as: Will the police investigation delay my ability to access the premises? How long will my operations be down? Is temporary security needed? When will employees be healthy enough to return to work so business can resume? Will I recover lost business income if I cannot continue operations?
Even if you get satisfactory answers to most of these questions, relying on your standard business insurance policies to cover your losses might leave you paying the bills. If you think your standard business policies will cover these expenses, you may want to think again. As an insurance and risk management professional, I’ve thoroughly analyzed traditional business policies and have found a number of shocking and expensive gaps in coverage.
Workers’ Compensation, Business Interruption, and General Liability insurance are usually insufficient for fully paying all costs related to a workplace violence event. But, there is good news. Workplace Violence insurance is becoming increasingly available on the market to help your organization recover. Below, I detail some of the most prevalent gaps in various traditional policies, and offer some insights on how those can be covered with Workplace Violence insurance.
If an employee is severely injured—whether by gunshot or other means—that employee will typically be covered by Workers’ Compensation. But what about employees who witnessed their coworker getting shot? Will they have the equanimity to work without fear, to return to everyday life without psychological scarring? Depending in which state your business is operating, Workers’ Compensation might not cover psychiatric care without a physical injury.
Think of the Pine Kirk Nursing Center shooting, which happened just last year: employees barricaded themselves in rooms to hide away—a traumatic experience in which they feared for their lives—while gunshots rang throughout the nursing center. The state they worked in, Ohio, does not provide Workers’ Compensation for mental trauma unless that trauma is caused by a physical injury—so these employees, who remained physically unscathed, had no coverage for the psychiatric care they likely needed.
This is where a good Workplace Violence policy is a must. Regardless of what state your business is in, you would have coverage for the psychiatric medical bills of your employees.
If you experience a loss and therefore can’t conduct business, you’ll be covered under the Business Interruption section of your Property policy, right? Not necessarily.
What if an event is so horrific that you have to close your business despite the lack of any physical property damage that would force you out of business? That’s a business decision—not a covered loss under the Business Interruption policy. The Pulse Nightclub, for example, closed in 2016 due to its horrific shooting incidence. They didn’t close because they couldn’t conduct business; they closed because the shooting was so emotionally devastating for employees and patrons. In this case, Business Interruption coverage was limited at best.
It doesn’t matter what your reason was to close your business, Workplace Violence insurance would pay for lost business income up to your policy limits.
General Liability insurance won’t automatically cover third parties. But why should you care? Their expenses are irrelevant to you, right? In most cases, no—you should care very much about the impact this type of event can have on your business partners, vendors, and clients. In addition to being compassionate and a good citizen, covering third parties makes good business sense to avoid lawsuits and protect your reputation.
If hurt on your premises, third parties are not prohibited from bringing an action against you for negligence. They may allege you didn’t take proper precautions to keep them safe. Lawsuits can last for years, and if they win, your General Liability policy will likely pay for covered damages and expenses up to the policy limits—but you will still likely end up paying for additional expenses that are not covered by General Liability. However, other than possibly defense expenses, the General Liability policy will not pay damages unless you are negligent.
Hence, you would be much better off having Workplace Violence insurance, which is more suitable for covering a wide range of violence-related exposures to third parties.
For instance, if you have a Workplace Violence policy, it will be used first to provide coverage before your General Liability insurance applies, and it protects you whether you are negligent or not. It will allow you to pay medical and funeral expenses, as well as a variety of other third party expenses, immediately following the incident. This may provide quick and compassionate relief to victims.
You should care about the third party’s well-being and want to respond in a positive way, as it also impacts your reputation. If you have Workplace Violence insurance, the crisis management services will help manage the chaos during the day of the incident and provide medical benefits to third parties who happened to be on your premises at the time. The alternative—leaving medical bills and funeral expenses to victims and their families—can be much worse, causing a public relations nightmare and permanent damage to your brand.
For example, in the wake of the Colorado Cinemark 2012 shooting, while victims were reeling in the painful aftermath of losing loved ones and the trauma of being attacked, medical bills and funeral expenses were piling up. Courts found that Cinemark was not liable—so the bills and expenses were left to the victims. Cinemark’s reputation suffered, and they were also left with paying the legal fees exceeding $700,000.
The solution—Workplace Violence Insurance
These are just a few major exposures that Workplace Violence insurance would cover. But a well-written policy can also include coverage options for temporary security for your business, psychiatric care for witnesses, and media management.
However, not all Workplace Violence policies are equal. A good policy in general should cover exposures for liability and extra expenses related specifically to violent incidents. Make sure to work with an experienced insurance advisor who is familiar with your business to design the right policy for your needs. If you need assistance analyzing your existing coverage and identifying the most appropriate Workplace Violence policy for your business, feel free to reach out to me at FGiachini@psafinancial.com or at 410-825-1411 x101.