Active shooter: Unique coverage for a unique risk
As the nation grapples with another mass shooting, insurers are responding to the rising demand for active assailant insurance coverage.
Another mass shooting shook the nation last weekend when a gunman randomly fired into the crowd at the Gilroy Garlic Festival in Northern California, killing at least three people, including two children, and injuring at least 12.
Mass shootings in the U.S. have spiked in the past few years and more insurers are responding to the growing demand for active assailant insurance coverage, which offers specialized policy components that are not found in traditional general liability policies.
While active assailant policies vary by company, the key components include typical GL coverages, such as: physical damage, business interruption, legal liability, as well loss of attraction and brand rehabilitation expenses, and funeral expenses and death benefits for victims.
But the most innovative and unique feature of these policies are the risk management services, such as risk assessment and crisis management, insurers are providing to help insured respond and recover faster if an event takes place, explains a team of experts at AM Best: Josie Novak, associate analyst; Vicky Riggs, senior financial analyst, property & casualty; and David Blades, associate director, industry research & analytics.
Terrorism vs. active shooter
“Before this specialized coverage, there was a bit of a gray area as to whether these incidents were covered under a commercial general liability (CGL) policy. It was up to the discretion of the insurance company if this coverage was provided since it wasn’t specifically included or excluded in CGL policies,” says Novak, Riggs and Blades.
AM Best’s new report, “Insurers Create New Types of Coverage for Mass Shooting Attacks,” highlights how some insureds do not realize that their insurance policies do not cover active shooting incidents and believe that this type of attack falls under a traditional terrorism policy, which it does not.
“Insurers offered terrorism coverage endorsements to CGL policies; however, in most active shooting incidents, there isn’t a specific political or religious motive to the attack,” the team says. “Most of the time the motive is unclear or personal in nature, which doesn’t fall under the Department of Homeland Security’s definition of terrorism; therefore, it would not be covered under a terrorism policy, leaving organizations to fend for themselves and footing a large bill.”
How are organizations responding?
According to Novak, Riggs and Blades, many organizations, especially schools, are buying active shooter coverage given the rise of events in recent years — in 2019 alone, 22 school shootings have occurred in the U.S.
The Stoneman Douglas High School shooting in Parkland, Florida, last year was a catalyst that the AM Best team says ignited school districts across Florida to buy active shooter coverage.
“After Parkland, McGowan Companies saw at least seven South Florida school districts purchase this type of coverage. We are also seeing schools seeking solutions through captive insurance vehicles and pooling their liability exposures together,” shares Novak, Riggs and Blades. “New York Schools Insurance Reciprocal (NYSIR) and United Educators are some of the captive insurers we are seeing that are adding this coverage, because it is something that their schools need to have not only to cover expenses but also for the benefit of the risk management services like preparedness seminars and post-event crisis management.”
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