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By KATIE KUEHNER-HEBERT who is based in San Diego. She has more than two decades of journalism experience and expertise in financial writing.

Even as banks and credit unions take measures to ensure their ATMs are as safe as possible, the industry is now faced with lawsuits by injured customers or families of those killed during robberies--and many of the claimants are either winning or the institutions are settling.

Wachovia Bank, now part of Wells Fargo & Co., in March settled a case brought by the family of Kimberly Boyd, who was abducted at gunpoint and taken to a drive-through ATM facility in Cobb County, Georgia.

After Boyd was forced to withdraw money from the ATM, the kidnapper murdered her. Melvin L. Hewitt, a partner at Isenberg & Hewitt PC in Atlanta settled the case, Boyd v. Ingles Markets Inc. and Wachovia Bank, for an undisclosed amount in a confidential settlement. Wells Fargo officials declined to comment on the case.

While the law is more favorable to financial institutions because customers are expected to take ultimate responsibility for their safety at ATMs, Hewitt said he believes a plaintiff has a legitimate claim if an institution is in noncompliance with the Bank Protection Act.

If the bank failed to follow minimum guidelines to discourage robberies or burglaries at its ATMs and night-deposit areas, an institution is particularly vulnerable to negligence.

"We recently interviewed a juvenile involved in a group of ATM robberies that resulted in serious injury to an ATM customer," Hewitt said. "He said his group chose that particular ATM because it was the worst one in the area--had lots of bushes and lots of places to hide."

ATM-related crimes are on the rise, due in part to the recession. There were more than 100 instances of teller machine robberies in Texas in 2010, Time magazine reported last October.

In San Diego, thieves have snatched or attempted to make off with ATMs 28 times in a 12-month period ending last October, up from just two cases of the crime in the year before. In Atlanta, as many as 35 machines have disappeared in 2010, up from just 12 machines in 2009.

Teller machines can hold as much as $200,000 in cash in their vaults, though during off-hours many machines hold less than $10,000 each, according to the Time article.

Making off with a machine, a technique known as "smash and grab," and causing bodily injury to customers withdrawing cash are different crimes.

The latter is more serious from the perspective of the institution because of the liability. In assessing whether to take a case in which a victim is involved, Hewitt considers the incidences of crime at ATMs and at other financial institutions in the area.

He assesses the bank's conduct pertaining to generally accepted security practices, such as those described under the Crime Prevention Through Environmental Design, a multidisciplinary approach to deterring crime.

Under these guidelines, ATMs should be placed in locations that are highly visible to pedestrian or vehicular traffic, have adequate lighting at both the ATM and the surrounding area, and minimal landscaping or columns to obstruct line of sight or serve as hiding places for would-be thieves.

"When Travelers works with banks, we look to see that safety measures have been implemented to protect the customer," said Nancy Abbott, casualty underwriting director, financial institutions for Travelers Bond & Financial Products, a unit of The Travelers Cos. "First and foremost, is someone from the bank regularly inspecting the ATMs for any change in exposure?"

A critical detail is whether the inspector has the authority to fix broken lights or trim overgrown bushes, she said.

Gary A. DelBuono, senior vice president and product manager, general liability commercial for Liberty Mutual Group, said underwriters will conduct risk assessments at institutions' ATMs if they detect weaknesses in the security procedures, which could also include whether there could be trips and falls at the machines. Institutions generally have 30 or 60 days to correct deficiencies.

If there are claims, the underwriters will make an evaluation to determine the conditions and whether the exposures can be mitigated. Insurers generally can't inspect all of the ATMs of their clients, because there are millions of the machines across the industry, said Connie Bayne, Liberty Mutual's senior vice president and manager of underwriting support services.

"We don't have the resources to go out and take a look at every single ATM, but we do a small sampling and bring issues to the banks," Bayne said. "We'll consult with banks on policies and procedures that they should have in place, but it's up to the bank to execute on this."

Problems occur when one financial institution acquires another and inherits branches with poorly located ATMs and night-deposit areas partially concealed by columns or bushes. Banks that don't redesign, relocate or close the equipment raise their liability exposure, Hewitt said.

Chris E. McGoey, a Los Angeles-based security expert witness and bank consultant, said that decisions about the placement of an ATM at many institutions are often driven by the sales department rather than the security department.

As a result, many institutions tend to be "incident-driven," McGoey said. "They wait until something happens before they do anything to be proactive."

First Horizon National Corp. in Memphis, Tenn., has made an effort to put safety before sales when placing its ATMs, said DeAnna Jacobs, vice president of ATM networks settlements.

"Since 1999, we have initiated a corporate standard for our branch locations which mandates through-the-wall, drive-up ATMs," Jacobs said. "They are not located in the back of branches, but on the side, where they are more visible to the front."

First Horizon is the parent of First Tennessee Bank, which operates about 400 ATMs in Tennessee, Georgia, North Carolina and Mississippi.

Some of the bank's older facilities that have ATMs in the back can't be retrofitted, but typically those locations do not get robbed as often as locations in economically deprived areas that have been built under First Horizon's corporate standard, she said.

Under the U.S. Community Reinvestment Act banks are required to provide a level of service for customers in all of its markets, which includes the availability of ATMs.

"It's not uncommon across the industry to have incidents," Jacobs said. "We strive to proactively take all the steps we can take and then we educate our consumers on the smartest ways to use self-service facilities. We try to educate our consumers that they have to be proactive in their safety."

First Horizon will implement higher levels of security measures in higher-risk locations, such as increasing the number of cameras or further intensifying the lighting,

"We also try to be proactive and do a semiannual risk assessment for each location," Jacobs said. "We include the area contiguous to the branches, to see if the neighborhood demographics have changed. For example, if we see graffiti, we know there potentially may be gang activity, which would drive crime."

To educate its customers, the bank includes statement inserts with safety tips and participates in a local Safe Street task force comprised of area institutions and law enforcement personnel that produce public service announcements on TV and conduct other measures to educate the public about safety.

This task force also keeps First Horizon abreast of all ATM robberies in its markets.

Like First Horizon, Texas First Bank routinely checks the safety of its ATMs, and its security personnel belong to a regional task force that receive immediate alerts of any crimes at financial institutions in Galveston County, said Kurt Otte, vice president of facilities management for the Texas City bank. "If there is a robbery at 8 a.m., we all know it by 9 a.m.," Otte said.

Perhaps the best method for minimizing violent ATM robberies is to educate customers on what they can do themselves to keep themselves safe, said Thomas Lekan, a senior vice president at Atlantis Security Management Services in Atlanta.

"A bank's best practice is to make sure customers are informed and that there is a continual assessment of the safety of their ATMs," said Lekan, former head of security for Key Corp. in Cleveland.

Lekan and his team would often speak to senior citizen groups about safety issues, and hold safety seminars at the branches with banking or investment officers.

October 15, 2011

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