Dealing with Civil Unrest
Retailers and other companies across the country are looking for a Plan B in the wake of riots that destroyed stores in Ferguson, Mo. and now Baltimore.
Meanwhile, carriers might seek to recover their losses from damage and business disruption claims by suing cities that tell their police to stand down to give space to protesters who “wished to destroy.” What’s unknown at this point is whether carriers would prevail.
Companies need to develop contingency plans specific for each location to manage events such as riots, as well as situations that could lead to them and the resulting consequences, said Sean Ahrens, security consulting services practice leader for Aon Global Risk Consulting in Chicago.
A key part of such planning includes determining under what circumstances onsite managers or a crisis management team should close retail locations.
“Now is also the time to review contingency plans to understand what other locations can be used during a time of unrest, as well as making sure companies that supply goods to them have alternative ways to make their goods available.” — Lance Becker, vice chairman, Northeast region, Arthur J. Gallagher & Co.
“Organizations that have robust plans and contingencies may actually have shelter in place to protect employees during civil unrest,” Ahrens said.
“But if a company has no policies or procedures in place, then in the worst case scenario, they should close the store and evacuate. Ultimately, a company’s duty of care is to protect their employees from all hazards.”
Post-event, companies should also provide counseling for employees who were caught up in a riot, though a lot of them might not want to come back, he said.
Tracy Knippenburg Gillis, global reputational risk and crisis management leader for Marsh Risk Consulting in New York City, said there are a lot of factors that determine when to close a facility, such as whether it serves a critical function in the community, or whether employees would lose needed income if the store closed prematurely during peaceful protests.
“Most organizations should have their crisis management teams on alert, if not actively engaged, monitoring and potentially making decisions on delayed openings or closures over the course of events,” Gillis said.
“They should be communicating to employees what they are doing and ideally monitoring what authorities are doing, so they can make the right judgment at the right time.”
Marsh has several clients in retail, hospitality and other entertainment-related industries that were impacted in last month’s Baltimore riots. Several suffered business disruptions due to curfews imposed by the city, said Bob O’Brien, a managing director in Marsh’s national claims practice in Washington, D.C.
“Companies should practice situational awareness,” O’Brien said.
“They have to go through several steps continuously, identifying exposures to the company and their supply chain. They should be aware of what’s going on all around them that could potentially impact them if they are caught up in a freeze zone or a closure zone.”
Companies should also review their insurance coverage to make sure they have the proper terms, limits and retention, he said. After an event, they should apply all possible triggers that could impact a claim, whether direct damage or civil authority that results in service interruption and ingress/egress issues.
Companies should make sure to secure documents to better ensure payment of their claims, he said.
Arthur J. Gallagher & Co. also had clients that suffered losses and filed claims as a result of the upheaval in Baltimore, said Lance Becker, vice chairman, Northeast region in New York City.
Becker said the recent riots that impacted area businesses serve as “an education” for companies to make sure their insurance policies cover “civil authority and unrest,” which would pay for either physical damage or losses for not being able to gain entry to the store.
“Now is also the time to review contingency plans to understand what other locations can be used during a times of unrest, as well as making sure companies that supply goods to them have alternative ways to make their good available,” he said.
Carriers might seek to recoup their losses by suing Baltimore, as several news outlets have reported that the police there were ordered to “stand down” and not prevent rioters from looting, burning or destroying stores, including a CVS pharmacy and an Ace Cash Express store.
Baltimore Mayor Stephanie Rawlings-Blake denied there was a stand down order, and she also told “Meet the Press” last Sunday that she regretted saying in an earlier press conference that space was given to protesters who “wished to destroy.”
Terrence Graves, a shareholder at Sands Anderson PC law firm in Richmond, Va., said that any city that experiences civil unrest might have sovereign immunity for those sorts of actions dealing with the police force.
“If a city government — like any other governmental entity — takes action within what is considered its governmental sphere, such as making political decisions, as opposed to its proprietary sphere such as providing water services or maintaining city streets, then a city might have governmental immunity,” Graves said.
“There is an interesting test that most courts would run though in order to determine whether the city was acting as a government or as a landlord.”
Can ‘Ebola-mania’ Give Way to a National Reset?
Ebola is not a new contagion and it is one for which the United States has been preparing for since at least post-9/11 heightened bioterrorism concerns.
While some may be critical of the care provided to the first patient with Ebola in Dallas, as well as resulting communication issues involving hospital and medical officials, clearly all involved intended to do their very best under uniquely stressful conditions that rarely any American hospital had faced before.
In what will surely be a repeating pattern in the near-term, American hospitals, clinics and doctors, as well as employers and other entities will continue to periodically encounter individuals that have acquired the Ebola virus and require treatment. The country will also have periods where there may be no known cases.
As of Nov. 11, and for the first time in 41 days since the initial U.S. patients, there were no known cases of Ebola in the U.S. That was short-lived as within days thereafter a surgeon who had contracted the Ebola virus in West Africa was transferred to the United States for treatment, but unfortunately the patient died.
I believe we should attempt a national “reset” to manage this public health issue in America — based on science and evidence.
In order to do so, it is important to understand the causative factors leading to the arguably explicable initial national panic surrounding Ebola. In the early moments of a risk crisis, leaders get limited chances to establish credibility and trust. The populace and media want to know the risk is understood and under control.
Early slips in Dallas failed this test, as I mention in my first article on this subject.
While some may feel on edge with regard to changing CDC guidance, in fact, the CDC is adjusting to new information and changing their guidelines appropriately; not dissimilar to how managers of risk adjust to any hazard exposure.
As managers of risk, we should be assessing the risks Ebola presents.
Ebola is really no different than other significant risks (e.g., terrorism post-9/11, Y2K, swine flu, grounding of certain airplanes).
There is a common pattern that moves from initial organic obsession to an easing, understanding, and respect of the risk that becomes balanced with other important considerations such as civil liberties, promoting international health, and maintaining world economic balance, for examples in the context of contagion risks.
For the emerging risk of Ebola in America, we are at a pivotal point to learn from the recent past and venture forward with the best of science and evidence-based risk management.
Will America press the reset? As risk managers, we stand in an influential position within our organizations to utilize the proven methods and tools of managing enterprise risks, including contagion risk.
As such, risk managers are in a unique position to lead with others; to reset the response to the Ebola virus in our unique national microcosm and move to a balanced American view appropriately and respectfully managing our interests while simultaneously attending to world health risk issues, especially in West Africa.
Read all of Jeff Driver’s Risk Insider articles.
Preparing for and Navigating the Claims Process
All of a sudden – it happens. The huge explosion in the plant. The executive scandal that leads the evening news. The discovery that one of your company’s leading products has led to multiple consumer deaths due to a previously undiscovered fault in its design. Your business and its reputation, along with your own, are on the line. You had hoped this day would never come, but it’s time to file a major claim.
Is your company ready? Do you know – for certain – how you would proceed, both internally with your own employees, and externally, with your insurance provider? What data will you need to provide, and how quickly can you pull it together? Do you know – and understand – the exacting wording of your policy? Are you sure you are covered for this type of incident? And even if you are a multinational with a global policy, how old is it, and is your coverage in concert with any recent changes in the laws of the country and local jurisdiction in which the incident occurred?
As should be clear from these few questions, if you organization is hit with a major event and you need to make a claim, just knowing that you are current with your premium payments is not enough. Preparation before the event ever occurs, strong relationships with your insurance team, and a thorough understanding of what needs to happen throughout the claims process are all essential to reaching a satisfactory claim settlement quickly, so that a long business disruption and further damage are avoided.
Get Ready before Disaster Strikes
The Boy Scout motto, “Be prepared,” applies equally well to organizations that may suddenly be faced with the need to navigate the complexities of the claim process – especially for large claims following a major crisis. Crises are by nature emotional events. Taking the following steps ahead of time, before disaster strikes, will help avoid the sense of paralysis and tunnel vision that often follows in their wake.
Open up a dialogue with your insurer – today.
For risk managers and others who will be called upon to interface with your insurer in the event of a crisis, establishing open and honest lines of communication now will save trouble and time in the claims process. Regular communication with your insurance team and keeping them up to date on recent developments in your organization, business and manufacturing processes, etc., will provide them with a better understanding of your risk profile and make it easier to explain what has happened, and why, in the event you ever have to file. It will also help in the process of updating and refining the wording in existing policies to reflect important changes that may impact a future claim.
Conduct pre-loss workshops to stress-test your readiness to handle a major loss.
Firefighters conduct frequent drills to ensure their teams know what to do when confronted with different types of emergencies. Commercial airline pilots do the same. Your organization should be no different. Thinking through potential loss scenarios and conducting workshops around them will help you identify where the gaps are – in personnel, reporting structures, contact lists, data maintenance, etc., before a real crisis occurs. If at all possible, you should include your insurance team and broker (if you have one) in these workshops. This will not only help cement important relationships, but it will also serve to further educate them about your organization and on what you will need from them in a crisis; and vice versa. The value to your organization can be significant, because your risk management team will not be starting from zero when you have to make a claim. Knowing what to do first, whom to call at your insurer, what data they will need to begin the claims process, etc. – all of this will save time and help get you on the road to a settlement much more quickly.
Know what your policy covers, before you need it.
This advice may sound obvious, but experience has shown that all too often, companies are not aware, in detail, of what their policies cover and don’t cover. As Noona Barlow, AIG head of financial lines claims Europe has noted, particularly in the case of small to mid-size organizations, “it is amazing how often directors and risk managers don’t actually know what their policy covers them for.” This can have dire consequences. In the case of D & O insurance, for example, even a “global” policy many not cover all situations, because in some countries, companies are not allowed to indemnify their directors. Obviously, these kinds of facts are important to know before rather than after an incident occurs. So it is important to have an insurer with both a broad and deep understanding of local laws and regulations wherever you have exposure, in addition to an understanding of the technical details of working through the claims process.
Make sure your data management policies are in order.
Successful risk management depends on having consistent, high-quality data on all of your risk-sensitive operations (manufacturing, procurement, shipping, etc.), so that you can quantify where the greatest risks sit in the organization and take steps to reduce them. Good data, complemented by strong analytics, will also help you to identify potential problems before they occur. It will also help you to maximize the effectiveness of your insurance purchasing decisions. Frequent, detailed conversations with your insurer will help you to identify any areas where additional data might be needed in the event of a crisis.
No one ever wants to find themselves in the midst of a crisis. But if and when such an event does strike, if you have taken the steps above you will be much better positioned to work through the claims process – and reach an effective resolution – as quickly and as smoothly as possible.
For more information, please visit the AIG Knowledge and Insights Center.