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“Shots Fired!”

Brokers and insurers need to approach active shootings the way they handle catastrophes

As the video opens, students pore over texts and laptops while a professor drones on about differentials. But somebody’s prowling the halls, clad in black, wielding a rifle. Heads turn at the sound of pops. One student says to another, “I think that was a gun!”

Then a voiceover kicks in with instructions: “Check for crowd reactions— shouts, screams. Trust your intuition. If it sounds like it could be a gun, react as though it is. Planning could save your life.”

The University of Alberta’s video “Shooter on Campus: Know You Can Survive” sends a stark message—and reflects a growing concern about active shootings. Post-secondary institutions, as well as retailers and restaurant owners across North America, are wondering what they can do to prevent a shooting from happening, and which insurance coverages will protect them if it does.

Tracy Knippenburg Gillis, practice leader of reputational risk and crisis management with Marsh Risk Consulting, says, “it’s been top of mind to a lot of our clients.” Gillis recently co-authored a research paper, “Addressing the Risk of an Active Shooter in Retail and Restaurant Settings.”

She says organizations with open access, like retail outlets and universities, have always been worried about security generally, but that “high-profile events in the last few years have caused more focus to be put on active shooters specifically.”

Read: Eaton Centre Shooting: Who’s Liable?

Events like those at Sandy Hook, Aurora and Virginia Tech are occurring more frequently. Despite a decades-long decline in gun crime, the Advanced Law Enforcement Rapid Response Training Center (ALERRT) at Texas State University says there were 125 active shootings in the U.S. between 2000 and 2013; between 2009 and 2013, their frequency spiked, averaging more than 15 incidents each year. (Active shootings, unlike other gun crimes, usually happen in public spaces with “no pattern or method to the selection of victims,” according to the Department of Homeland Security.) ALERRT doesn’t keep stats on shootings in Canada, but the Montreal massacre and the more recent shooting in Toronto’s Eaton Centre (though not strictly an active shooting) remind us we’re not immune to the threat.

“What we always suggest is that a workplace violence program should be part of your broader security and crisis management and response program,” Gillis says. “The challenge, like any risk, is you’ve got to focus on how it would really unfold and what the situation would really be like, so you understand what you’re going to be required to do.”

The specifics of a program will vary between employers, she says, but small businesses should still prepare for the possibility. “You need to spend some brain power and some time on this, but it doesn’t otherwise have to be an expensive or elaborate program.”

There are a few universal points that any emergency plan should address for safety—and to guard against legal liability. The Marsh paper lists four: communication, working with law enforcement, identifying threats, and sheltering in place or evacuating. Communication can be as simple as a booklet in the staff room. Working with law enforcement is an obvious point, but Gillis says it’s important that the relationship not be casual: “It’s even better if you take the extra step to talk to them and create a relationship up front so that you know one another and you understand what they’re going to do specifically [in case of a shooting].”

Identifying threats is another important aspect. The report recommends that organizations “have processes in place through which employees can confidentially report suspicious or potentially violent behaviour or domestic concerns to human resources and security departments.”

The last piece, sheltering in place or evacuating the building, was the focus of the University of Alberta’s video. Philip Stack, the university’s associate vice-president, risk management services, says it’s important from a liability point of view for the university to inform its constituent groups. “It’s always a question of, ‘Have you done everything reasonable that would address this type of scenario? Have we taken reasonable steps to inform the community of a potential risk?’”

Those reasonable steps are now at the heart of a lawsuit against York University in Toronto. After a shooting on campus in March, victims and witnesses to the incident filed a $20.5 million action against York, claiming the school provided inadequate security. The claimants’ lawyer said at a press conference that they were “alleging a pattern of negligence.” The case is still before the courts.

Mark Aiello, the practice leader for organizational risk and resilience at Marsh Canada, says many post-secondary institutions in Canada are taking a serious look at active shooter preparation. This is partly because, like retail and restaurant owners in the States, universities are generally open spaces with few barriers to entry. They also deal with many constituent groups, from students and faculty to administrators and support staff. Smaller schools may be less exposed to external threats than bigger universities, but that doesn’t mean they should ignore the possibility of a gunman roaming their halls.

“They are still open campuses and you are still working with one of the most volatile age groups in the population, so those risks still do exist,” Aiello says. “You don’t have necessarily the same external threats to come onto campus, so your focus is going to be maybe a little more internal in those types of situations.”

There isn’t even a one-size-fits-all approach for the bigger schools. Ryerson University in downtown Toronto has an emergency handbook with a section on armed threats, but the university “wouldn’t go out and have a whole community simulation,” as the University of Alberta did for its video, says Julia Lewis, Ryerson’s director of integrated risk management. Ryerson’s security and emergency services have done an exercise with the Toronto police, who would take charge of any active shooter situation. “We are well-versed on our mutual needs and expectations in that circumstance.”

What Is and Isn’t Covered

Although the details may differ between a shooting and another major incident, like a data breach or a storm, Tracy Knippenburg Gillis says the core response team should remain the same. “You’re still worried about people, assets, operations, production, reputation, financial impacts. How you go about [responding] … doesn’t necessarily change.”

The Marsh report emphasizes that one of the most important components of a response to a shooting is “focusing on assisting employees, customers and the families of any victims.” In addition to being the proper, compassionate way of handling a tragedy, doing so is important from a liability perspective. During a webinar co-hosted with Marsh, Kurt Rosenast, complex director, excess casualty with AIG, said, “The first inclination of a restaurant or mall owner is to say, ‘We had three vehicles and four individuals deployed for security.’ … Maybe the fifth or sixth person would have recognized this and been able to stop it. That will provide the foundation, three or four years later, of a negligent security claim.”

“The full extent of cost is never going to be covered, but understanding what is, is very important.”

For businesses, a focus on preparation and victims will also mitigate any reputation damage. Aiello says an institution should ask, “How do we adapt as an organization? Do we… become known as the school that had the shooting, or the mall where the bomb went off? Or do we respond and adapt our operations in such a way that we become the compassionate organization that was able to save lives?”

When the response inevitably turns to the cold reality of an organization’s insurance coverages, they’ll be confronted with a thick stack of policies, claims, caveats and exceptions. Even the most basic coverage—workers’ compensation—is not black-and-white. For example, Ontario’s Workplace Safety and Insurance Board entitles employees to benefits for “traumatic mental stress that is an acute reaction to a sudden and unexpected traumatic event arising out of and in the course of employment.” That language would seem straightforward, but the Marsh report warns that this could exclude a targeted attack on an employee, which would fall outside the course of employment. “Other employees injured during such an attack, however, would typically be able to file claims.”

WSIB will only cover employees injured in a shooting; for everything else, businesses would have to lean on commercial general liability policies. Betty Hornick, national commercial team leader, product development with Aviva Canada, says that CGL policies usually include coverage for medical expenses for third parties, like customers. For CGL coverage to be triggered, though, the insured must be found legally responsible for the incident: for example, ignoring explicit threats or neglecting to act on the suspicion of ne. The question of responsibility would probably come up soon after the shooting but, depending on the speed of the justice system, could take years to resolve.

Read: How Security at a Disaster Scene Impacts Your Policyholders

Even some CGL policies won’t cover the whole range of people affected. The Marsh report notes that, “depending on the size of a loss, umbrella and excess coverage may be triggered, and could provide support to affected organizations and victims’ families.”

Hornick says that a business concerned about active shootings needs to look beyond standard property coverage, which would cover things like bullet holes or broken glass. “The retailer should also have business income (or interruption) coverage to provide income protection, along with the extension of coverage of interruption due to civil authority.” Even after the shooting is finished and victims have been tended to, businesses might need to stay closed for a few days while police investigate and clear the crime scene.

Business interruption insurance would not cover all losses. For example, the Marsh report notes, it “generally would not apply” if a store or restaurant chose to stay closed for longer than absolutely necessary—even if it was for a good reason, like installing new security features or easing the burden on employees.

In the United States, retailers and other potential targets have an additional fallback in the Terrorism Risk Insurance Act. But the legislation, passed in 2002 and renewed by the Senate last month (ahead of a scheduled expiry at the end of the year), only applies to “certified” acts of terrorism—“part of an effort to coerce the civilian population of the United States” to influence government policy.

“There are many, many events where the insurance is not going to cover the entirety of the cost to your organization, whether it be lost sales, disruption of business, lawsuits, other damage, cost to repair and recover, rebuild, et cetera,” says Gillis. “The full extent of cost is never going to be covered, but understanding what is, up front, is very important.”

Correction: The original version of this article misstated the status of the Terrorism Risk Insurance Act. The legislation has been renewed by the Senate, but not yet by the House of Representatives.

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Copyright 2014 Rogers Publishing Ltd. This article first appeared in the August 2014 edition of Canadian Insurance Top Broker magazine

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.