Politics aside, there’s no denying that active shooting incidents in the U.S. are on the rise. An FBI review of the period between 2000 to 2013 found an annual average of 16.4 such incidents in the most recent seven years of the study, which was more than double the 6.4 annual average of the first seven years. And commercial environments were by far the most frequent site of these horrific events, accounting for nearly 46% of the total. Indeed, three of the worst mass killings in recent memory occurred in hospitality industry settings: a movie theater (Aurora, Colo., 2012), conference center (San Bernadino, Calif., 2015) and nightclub (Orlando, 2016).
16.4Active Shooting Incidents
An FBI review of the period between 2000 to 2013 found an annual average of 16.4 such incidents in the most recent seven years of the study, which was more than double the 6.4 annual average of the first seven years.
Many industry operators, when assessing their risk exposure for such worst-case scenarios, assume they are more than covered by general liability or terrorism insurance. But because of what can be head-scratching distinctions—more on that shortly—neither type of policy may be sufficient. That’s why many insurance carriers have begun to offer specific “active shooter” policies. (An active shooter incident is one in which an individual attempts to kill multiple persons in a confined and populated area.) Crystal & Company’s analysis of this evolving area suggests that there are strong reasons for hospitality industry operators to consider such coverage—reasons that go beyond the monetary damages that stem directly from a shooting.
Before addressing the specifics and advantages of these new policies, it’s helpful to understand why general liability or terrorism insurance may not suffice. Regarding the former, a report from McGowan Programs on Active Shooter Insurance states, “The Commercial General Liability may not respond unless the insured is deemed to be ‘liable’ for the event.” Further, “there are stated exclusions in the policy which may include employee as perpetrator, damage to property, business interruption or terrorism.”
In other words, many of the typical causes and consequences of mass killing/active shooter incidents may fall outside the scope of general liability policies.
Terrorism insurance, on the other hand, only comes into play if an event is formally classified as a terrorism event. To be sure, that is no minor obstacle: As explained in the Terrorism Risk Insurance Program Reauthorization Act of 2015, a qualifying event must be deemed as such by multiple Cabinet secretaries and generate at least $5 million in property and casualty losses. (As a point of reference, the 2013 Boston Marathon bombing was not technically certified as a terrorist event.)
It was to fill these (and other) coverage gaps that active shooter policies were conceived. Specifically intended for any act involving an on-premises threat or use of a deadly weapon—more on that later—such coverage typically provides as much $25 million (with deductibles) per event for primary third party liability and business interruption. Multiple carriers now offer these policies, with competitive pricing. For this reason alone, Crystal & Company often suggests to operators of hotels, amusement parks, entertainment complexes, conferences, restaurants and other hospitality-related venues to consider such coverage.
But as comforting as it is to be insured against the immediate economic consequences of such acts—and to know that victims will be appropriately compensated—there is another equally important benefit to active shooter coverage: the ability to effectively (and graciously) manage the aftermath of an attack in such a way that mitigates brand damage.
The best active shooter policies include funeral costs for victims, crisis counseling for all affected, added security and 24/7 access to crisis experts and other public relations professionals.
Not only do such “extras” allow operators to be their best selves when dealing with victims and their families, they also provide guidance for handling the intense media scrutiny and communications challenges that inevitably result. In addition, any policy that Crystal & Company proposes would help prevent a policyholder from ever having to file a claim in the first place, specifically by including a post-signing security audit. In these audits, experts identify potential gaps, train employees in workplace violence prevention and even provide a mid-incident action plan.
With fine points that include defining a covered deadly weapon (e.g., pipe bomb, knife, acid, assault rifle, etc.) and determining an injured coverage “trigger” (too few or too many casualties and an event may not qualify), this is without question among the most uncomfortable areas of insurance to consider. But for reasons moral as well as practical, failing to do so is not an option for responsible hospitality industry operators.
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