How the Insurance Industry Pioneered Coverage
Coverage for violent events has several names. These include Shooter Program coverage, Active Assailant Program coverage, or Terrorism coverage that includes active shooter. These names will vary by carrier. For this paper, we will use “Active Shooter” to cover all of the available forms.
With the changing face of extremism, it became clear to insurers and their larger clients that Terrorism, Kidnap and Ransom coverages were inadequate to cover the liability and property damage and business income losses arising out of an active shooter event. Carriers responded within the last two years by developing a unique product referred to as Active Shooter coverage. Some carriers created a standalone active shooter policy while others enhanced their terrorism policies to offer not only Property coverage, but also Liability coverage. Active shooter policies can also include post-incident crisis management services.
How the organization responds to an active shooter event is critical.
Organizations must not let their crisis response become the next crisis. Even the most experienced public relations professionals in an organization probably have no training in managing an active shooter media response. They need advice on what to say and how to handle situations like Broward County encountered after its 2017 airport attack. The county faced frustrated travelers and spent over half a million dollars to return luggage abandoned by travelers after that violence.
Organizations are shifting from responding to an event to a more holistic risk management model. Today, the insurance industry is developing solutions that not only respond to losses, but also help to prevent losses from occurring, a more proactive approach to insurance coverage.
Today’s Active Shooter Events
Violence may start with threats such as a Facebook post warning. Other threat-based workplace events such as bomb threats, school threats, or targeted harassment can call for additional security, closure for bomb sweeps and other business disruption. Most active shooter insurance forms cover stalking and harassment threats. In less severe harassment cases, monitoring or performing behavioral risk assessments to head off incidents is money well spent by carriers.
Since active shooter events continue to evolve, unanticipated costs can occur. For example, an organization may require additional temporary security after a workplace incident. Under some coverage forms, coverage is available for employee counseling and retraining, reservation cancellations such as those faced after the Mandalay Bay event, and other unanticipated costs. Even with smaller events, resultant costs can run in the millions.
Public relations fallout and subsequent reduced revenue is almost a certainty. It can take years for businesses to repair their brand after events of this nature. Crisis counseling, funeral expenses, a crisis response hotline, media management – policies differ in their coverage offerings. It is important to work with a wholesaler who can guide you to determine the best policy fit for your clients.
Active Shooter Coverage Overview – What’s Available in the Insurance Market
Active shooter coverage is not a standard form. Coverage is available in standalone policies or insurers can endorse Terrorism and Sabotage/Threat policies to provide coverage. The names of the coverage will vary and so will the coverages.
Active Shooter Protection coverage is a newer Liability and Property coverage designed to protect organizations at risk from an active shooter event. How forms define an event and the type of weapon used to trigger the event may vary. Agents must read the forms, the insuring agreements and understand the definitions and exclusions. This approach can help ensure agents recommend the coverages that work best for their clients’ particular needs.
For example, a special-events policy may be available for a one-day event like a parade while other clients will want year-round coverage. Additionally, there are carriers who will provide Property Damage and Business Income coverage only, with no liability component. These property policies will also provide critical post-event services such as crisis management teams, public relations help and general event response management.
In the 2007 Omaha, Nebraska, mall shooting, authorities closed surrounding businesses after the event for several days during their peak season. The standard special form policy will only cover a loss caused by actual physical damage to the insured’s property due to an insured peril – the special form excludes active shooter.
How forms define an event and the type of weapon or weapons used in the event are important.
For example, some policies do not define “weapon” while one carrier defines “weapon” as a firearm, handheld weapon, moving vehicle, or the use of an explosive device in conjunction with the former weapons. Reading the policy definitions can help agents understand what type of events or actions the policy will cover.
The policy trigger for most forms is an “active shooter,” “act of terrorism,” or an “active assailant” event as defined in the policy.
Carriers generally write the Liability coverage on a claims-made basis, and liability limits of $20 million or more are available in many instances. Over $50 million in Property coverage is available.
Active shooter policies generally function as enhancements to primary liability insurance in conjunction with the “other insurance” clause. If a third party sues your insured for liability, some general liability (GL) policies could respond. However, GL policies may also exclude acts of terrorism and have other coverage limitations. For example, some GL policies may exclude acts committed by employees, such as a disgruntled worker who turns on his or her colleagues or managers. In addition to adding more limits, the loss prevention and crisis response services offered by active shooter policies protect your insureds for an affordable premium.
Of course, these policies will exclude all first-party damage and business income except for an incidental sublimit of $500,000 or less on GL policies while full limits are available on some Property policies.
In our next post, we will discuss the benefits of active shooter coverage, some key policy features and the importance of an organization’s risk management program to the underwriting submission.
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